Question: 4. (30pts) Let the money demand function be (MfP)d= 60-20r+4Y, the consumption function be C = 15+0.7(YT) and the investment function be I = 30-2r,

4. (30pts) Let the money demand function be (MfP)d= 60-20r+4Y, the consumption function be C = 15+0.7(YT) and the investment function be I = 30-2r, where r is the real interest rate in %. Let T denote taxes, G denote government expenditures, P denote the price level and Ms denote the money supply. (a) What is the equation that describes equilibrium in the goods market? What is the equation that describes equilibrium in the money market? Be specic according to given equations above

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

The following data were obtained from a study of the times required to conduct a consumer test panel study: Costs are given in thousands of dollars, time in weeks. (a) Find the all-normal schedule...

Consider IS-LM model. Let the money demand function be ()=60 - 20r + 4Y, the consumption function be C = 12 + 0.8(Y - T) and the investment function be / = 30 - 2/ where r is the real interest rate...

let the money demand function be: L(r,Y) =50 -25r +5Ywhere r is the real interest rate.Suppose the price level isP =2 and the money supply is M S =500.Which of the following equations describes the...

1.Suppose that the trade off between unemployment and inflations is determined by the Philips curve: 1 =u" -a(x-*') Where u denotes the unemployment rate a" un the natural rate, # the rate of...

Explain in details Problem 10.5. Suppose that the money demand function is: = Y -100. r, where r is the nominal interest rate=real interest rate in percent. Let Y=1000, and M=1000, and P=2. A. Graph...

3. Was Out . Consider the economy of Hicksonia. a. The consumption function is given by C = 300 + 0.6(Y - T). The investment function is I = 700 - 80r. Government purchases and taxes are both 500....

(a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily...

I \"ulna-.15 I I I c} Graph the saving and investment curves for the US, with saving and investment on the horizontal axis and the real interest rate on the vertical axis. Clearly label the world...

13. THE KEYNESIAN MODEL IN THE SHORT AND LONG RUN WITH A POSITIVELY SLOPED SRAS-CURVE. THE AS/AD-model. 2. Consider the following changes in the sticky-wage model. a. Suppose that labor contracts...

S h o w yo u r w or k . Answer the questions. In 2016, a country's GDP is $214.8 billion. If the economy experiences 4% economic growth over each of the next two years, what will the be the value of...

12.3 12.3) The following equations describe an economy: a) Identify each of the variables and briefly explain the meaning of each one. b) From the preceding list, use the relevant set of equations to...

The data in this case come from the financial reports of Priceline.com.* Required a. 1. Compute the current ratio for 2010 and 2009. Comment. 2. Compute the debt ratio for 2010 and 2009. Comment. 3....

A raffle offers a first prize of $1000,2 second prizes of $500 each, and 20 third prizes of $10 each. 10,000 tickets are sold at $1.00 each. Find the expected winnings?

The basic principle of equity theory is that employees try to maintain tilincs bitwecn thici efforts mind thiti zompensatton compared to others in sloniar positions. True tulu

If an AIS system can helps highlight the customers most likely to purchase their products, that would show up most prominently in which account on the income statement? Multiple Choice Interest...

5. State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement. LO1.3

4. What are the key elements of the scientific method and how does this method relate to economic principles and laws? LO1.2

1. What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: allocating a square block in the...