Question 3. Assume the following model of the economy, with the price level fixed at 1:C= 0.8(Y – T)T=1,000G= 1,000MIP = M/P = 0.4Y – 40rI= 800 – 20rY= C+I+GM = 1,200Write a numerical formula for the IS curve, showing Y as a function of r alone.(Hint: Substitute out C, I, G, and T.)Write a numerical formula for the LM curve, showing Y as a function of r alone.(Hint: Substitute out M/P.)What are the short-run equilibrium values of Y, r, Y-T, C, I, private saving, publicsaving, and national saving?Assume that G increases by 200. By how much will Y increase in short- runequilibrium? What is the government-purchases multiplier (the change in Ydivided by the change in G)?a.b.с.d.

GIVEN C = 0.8(Y – T) T = 1,000I = 800 – 20r G = 1,000Y = C + I + G…

Answered: Question 3. Assume the following model…

Question 3. Assume the following model of the economy, with the price level fixed at 1: C= 0.8(Y – T) I= 800 – 20r T=1,000 G= 1,000 MC/P = M/P = 0,4Y – 40r Y =C+1+G M = 1,200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Questions 2 from a to e parts
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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.
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