The following set of equations describe an economy: C = 14,400+ 0.5 (YT) - 40,000r lp = 8,000 - 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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The following set of equations describe an
economy:
C = 14,400+ 0.5 (YT) - 40,000r
lp = 8,000 - 20,000r
G = 7,800
NX = 1,800
T = 8,000
Y* = 40,000
Suppose that the real interest rate (r) is 10%. Is the
economy in long run equilibrium? If not, what real
interest rate should central bank set to restore the
economy back to the long run equilibrium? And
what methods can central bank use to adjust the
interest rate? (Round your answer to 2 decimal
places)
Transcribed Image Text:The following set of equations describe an economy: C = 14,400+ 0.5 (YT) - 40,000r lp = 8,000 - 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)
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