3. 2. 5. Suppose that in the Federal Economy of APOLLONIA the following economic relationships hold...

 

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3. 2. 5. Suppose that in the Federal Economy of "APOLLONIA" the following economic relationships hold for the fiscal year 2018-2019. C-70+0.35YD 1. 6. 7. 8. 9. 10. 11. T=0.21Y IP=30-10i G=120 X=200+ 0.06Y M = 10-0.02Y R 50 MS = 900 MDT = 0.14Y MDS10Y - 5i MDP = 40 C- Consumption Function and YD= Disposable Income T= Taxes and Y-Gross Domestic Product IP= Private Investment G=Government Expenditure X= Export Function M = Import Function R- Transfer Payments MS Exogenous Money Supply MDT= Money Demand for Transaction MDS = Money Demand for Speculation MDP- Money Demand for Precaution a. Establish the equilibrium levels of i* and Y*. Find also the optimum values for all other economic variables of the "Apollonia" economy (10 marks). b. Assume that the economy of "Apollonia" is at the following equilibrium point: i=2 and Y = 1500 Is there an excess Demand for Money or an excess Supply of Money in this situation? How much? What would you advise the Governor of the Federal Reserve to do? Explain your answers analytically by using well-drawn-diagrams (10 marks). 3. 2. 5. Suppose that in the Federal Economy of "APOLLONIA" the following economic relationships hold for the fiscal year 2018-2019. C-70+0.35YD 1. 6. 7. 8. 9. 10. 11. T=0.21Y IP=30-10i G=120 X=200+ 0.06Y M = 10-0.02Y R 50 MS = 900 MDT = 0.14Y MDS10Y - 5i MDP = 40 C- Consumption Function and YD= Disposable Income T= Taxes and Y-Gross Domestic Product IP= Private Investment G=Government Expenditure X= Export Function M = Import Function R- Transfer Payments MS Exogenous Money Supply MDT= Money Demand for Transaction MDS = Money Demand for Speculation MDP- Money Demand for Precaution a. Establish the equilibrium levels of i* and Y*. Find also the optimum values for all other economic variables of the "Apollonia" economy (10 marks). b. Assume that the economy of "Apollonia" is at the following equilibrium point: i=2 and Y = 1500 Is there an excess Demand for Money or an excess Supply of Money in this situation? How much? What would you advise the Governor of the Federal Reserve to do? Explain your answers analytically by using well-drawn-diagrams (10 marks).

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a Establish the equilibrium levels of i and Y Find also the optimum values for all other economic variables of the Apollonia economy i equilibrium int... View the full answer