The following set of equations describe an economy: C= 15,000 + 0.75(Y – T) – 45,000r Ip= 10,000 – 22,500r G= 8,200 NX= 1,800 T= 8,500 Y*= 82,100 Find PAE equation and what should be the interest rate to eliminate the output gap.

The following set of equations describe an economy: C= 15,000 + 0.75(Y – T) – 45,000r Ip= 10,000 – 22,500r G= 8,200 NX= 1,800 T= 8,500 Y*= 82,100 Find PAE equation and what should be the interest rate to eliminate the output gap.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 7E

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Question

The following set of equations describe an economy:
C= 15,000 + 0.75(Y – T) – 45,000r
Ip= 10,000 – 22,500r
G= 8,200
NX= 1,800
T= 8,500
Y*= 82,100
Find PAE equation and what should be the interest rate to eliminate the output
gap.

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