Suppose you are given the following information about an economy: Short run Aggregate Supply: SRAS Y = 5000r + 14,400 %3D Long run Aggregate Supply: Aggregate Demand: Investment Spending: Consumption Spending: Government Spending: Net Exports (eX– iM): Y* = 25,000 Y = C+I+G+ NX I = 4000 – 250r C = 1000 + 0.75(Y – T) LRAS AD G = 2000 NX 500 %3D Taxes – Transfers: T = 2400 %3! Monetary Policy: Money Demand: Money Market equilibrium: Fisher equation: r 3D MP = 20,000 – 2000i M$ = MP %3D i = r+n where i is the nominal interest rate (i.e. when the interest rate is 7%, it means i = 7) e. Find the short run equilibrium level of real GDP (Y), and inflation rate (1), in the short run. What is the output gap in the economy? Is it an expansionary or recessionary gap?
Suppose you are given the following information about an economy: Short run Aggregate Supply: SRAS Y = 5000r + 14,400 %3D Long run Aggregate Supply: Aggregate Demand: Investment Spending: Consumption Spending: Government Spending: Net Exports (eX– iM): Y* = 25,000 Y = C+I+G+ NX I = 4000 – 250r C = 1000 + 0.75(Y – T) LRAS AD G = 2000 NX 500 %3D Taxes – Transfers: T = 2400 %3! Monetary Policy: Money Demand: Money Market equilibrium: Fisher equation: r 3D MP = 20,000 – 2000i M$ = MP %3D i = r+n where i is the nominal interest rate (i.e. when the interest rate is 7%, it means i = 7) e. Find the short run equilibrium level of real GDP (Y), and inflation rate (1), in the short run. What is the output gap in the economy? Is it an expansionary or recessionary gap?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter23: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 1QR
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