Q8Determine the equilibrium income Y and interest rate r, given the following informationabout the commodity market:C = 0.6Y + 60I = -40r + 1300where C and I denote consumption and planned investment, respectively, and the follow-ing information about the money market:M5 = 600L, = 0.2YL2 = - 30r + 40%3D%3Dwhere Ms, L1 and L2 denote money supply, transaction-precautionary demand for moneyand speculative demand for money, respectively.The marginal propensity to consume decreases. By producing a rough sketch of the ISand LM curves on the same diagram, explain whether the equilibrium values of Y and rwill increase, decrease or stay the same.

Definition: Short-run competitive equilibrium is a circumstance where, given the organizations on…

Q8 Determine the equilibrium income Y and interest rate r, given the following information about the commodity market: C = 0.6Y + 60 1 = -40r + 1300 where C and I denote consumption and planned investment, respectively, and the follow- ing information about the money market: M = 600 L, = 0.2Y L2 = -30r + 40

Q8 Determine the equilibrium income Y and interest rate r, given the following information about the commodity market: C = 0.6Y + 60 1 = -40r + 1300 where C and I denote consumption and planned investment, respectively, and the follow- ing information about the money market: M = 600 L, = 0.2Y L2 = -30r + 40

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Please pleaseee do this Question : For this question assume that the real money demand function is L(R, Y) = kY - hR where k > 0 represents the sensitivity of the money demand to income and h > 0 represents the sensitivity of the money demand to the interest rate. Suppose that these sensitivity parameters are not known for the economy of Macroland and there are two possibilities: it is either i) high k and low h, or ii) low k and high h. To understand which one of these two scenarios is correct you analyze a given policy change: an increase in the overall level of taxes. Using the AA-DD model, compare and contrast the short run effects of this policy change in Macroland under these two scenarios. Explain your results intuitively.
a) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?
Consider a fall in the money supply and the impact that this will have on equilibrium in the goods market via both transmission mechanisms. Which of the following would lead to the biggest change in national income following this fall in the money supply? (a) An investment demand curve that is unresponsive to interest rate changes and an elastic liquidity preference curve. (b) An elastic investment demand curve and a high level of responsiveness from export and import demand following a change in the exchange rate. (c) A lack of responsiveness of the exchange rate to interest rate changes and an endogenous money supply. (d) A low level of responsiveness from export and import demand to a change in interest rates and an exogenous money supply curve.
7) Explain what is meant by the ‘Zero Lower Bound’ in relation to interest rates and suggest how it might be avoided.
Y5
By using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? d)A sale of government securities by the TCMB f)An increase in the discount rate e)decrease in the level of aggregate output
Assume that the demand for real money balance (M/P) is M/P = 0.6Y-100i, where Y is national income and i is the nominal interest rate (in percent). The real interest rate r is fixed at 3 percent by the investment and saving functions. The expected inflation rate equals the rate of nominal money growth. If Y is 1,000, M is 100, and the growth rate of nominal money is 1 percent, what must i and P be?
I need help with 5 and 10