Question 2 Assume the following model of a closed economy, with the price level P fixed at 1.0 C= 0.6 (Y – T) I = 500 – 50r Mg = 450 T = 200 G = 250 Mp = 2Y – 200r Where C is consumption, Y is output, T is taxes, I is investment, r is the interest rate, G is government spending, Mş is the money supply, and Mp is money demand. a) Derive formulas for the IS and LM schedules, showing Y as a function of r alone. b) Calculate the short-run equilibrium values of Y, C, I, and r. c) Suppose that the central bank doubles the money supply to 900. Draw a diagram, and explain in words what will happen. Find the new values of Y, r, and I.

Question 2 Assume the following model of a closed economy, with the price level P fixed at 1.0 C= 0.6 (Y – T) I = 500 – 50r Mg = 450 T = 200 G = 250 Mp = 2Y – 200r Where C is consumption, Y is output, T is taxes, I is investment, r is the interest rate, G is government spending, Mş is the money supply, and Mp is money demand. a) Derive formulas for the IS and LM schedules, showing Y as a function of r alone. b) Calculate the short-run equilibrium values of Y, C, I, and r. c) Suppose that the central bank doubles the money supply to 900. Draw a diagram, and explain in words what will happen. Find the new values of Y, r, and I.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a macroeconomic model for an open economy with the government. Consumption is given by C = 250 + bYd, where b = 0.8, Yd = (1-t)Y, and t = 0.1. Investment is given by I = 1,200 – 2,000R, and net export is given by X = 525 – 0.1Y – 500R. Assume that G = 1,200. Money demand is given by (Md/P) = 0.1283Y – 1,000R. Assume that P = 1, and the fixed money supply is given by (Ms/P) = 900. Drive the expression for the IS curve from the model. Drive the expression for the LM curve from the model. Drive the IS-LM equilibrium from the model.
I need clarification on what a "numerical solution" should be in the context of my economic question. Is it simply a number or numerical value, or is it a formula? I'm not looking for the answer to this problem. I am just making sure i understand the question. See attached.
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Consider the basic Macroeconomic model involving: Private sector consumption: C = co+c1(Y-T); Y = GDP, T = Taxes Tax function: T = to+t1Y Business sector investment: I = io+i2r, r=interest rate Government spending: G = Go Exports: X = xo+x1x; x = Exchange rate of the dollar Imports: M = mo+m1Y+m2x; x = Exchange rate (a) Identify and explain the parameters: co, t1, i2, and m2. (b) Solve this model for the equilibrium GDP (Y*).
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The outbreak of COVID-19 adversely attacks most economies. Some economists argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Suppose two quarters since the outbreak of the COVID-19, changes in selected macroeconomic data of Country X can be summarized as below: Last Year This Year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% Assume that argument (ii) is true, briefly discuss one plausible short-run dilemma facing the central bank of Country X.
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