you will WUIR WILIn he er to Caiculate a maCr Igebra. The steps are: ) find the IS equation E) find the MP equation ) combine them by substituting the r value from the MP equation into the IS equation Assume C = 1 + 0.75Y - 0.5T - 25r, I = 19 - 75r, G = 12, T = 14, the average FFR = 0.05, expected nflation is 3%, the risk premium is 4%, and potential output is 80. What is the output gap in the nacroeconomic equilibrium?
you will WUIR WILIn he er to Caiculate a maCr Igebra. The steps are: ) find the IS equation E) find the MP equation ) combine them by substituting the r value from the MP equation into the IS equation Assume C = 1 + 0.75Y - 0.5T - 25r, I = 19 - 75r, G = 12, T = 14, the average FFR = 0.05, expected nflation is 3%, the risk premium is 4%, and potential output is 80. What is the output gap in the nacroeconomic equilibrium?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:In this problem you will work with the IS-MP model to calculate a macroeconomic equilibrium using
algebra. The steps are:
1) find the IS equation
2) find the MP equation
3) combine them by substituting the r value from the MP equation into the IS equation
Assume C = 1 + 0.75Y - 0.5T - 25r, I = 19 - 75r, G = 12, T = 14, the average FFR = 0.05, expected
inflation is 3%, the risk premium is 4%, and potential output is 80. What is the output gap in the
macroeconomic equilibrium?
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