Question
Consider an economy with the following economic functions; cd = 1000+ 0.45Y - 45000r0.5G Id=500 22500r Md = 0.5Y - 3000 And other variables
Consider an economy with the following economic functions; cd = 1000+ 0.45Y - 45000r0.5G Id=500 22500r Md = 0.5Y - 3000 And other variables are n = 0.04, G=250, Y = 500, and M = 4200. a) Find the equilibrium values of the real interest rate, consumption, investment, and the price level. b) Suppose the money supply increases to 8400. Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (Assume that the expected inflation rate is unchanged)
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