Question: Consider IS-LM model. Let the money demand function be ()=60 - 20r + 4Y, the consumption function be C = 12 + 0.8(Y - T)

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 in %. Let T denote taxes, G denote government purchases, P denote the price level and M denote the money supply. Calculate the following (Round up to TWO decimal places if needed. Enter only numbers) (1) Assume that T = 20, G = 10, P = 3 and M-= 300. (a) Calculate the equilibrium real interest rate r (b) Calculate income Y (c) Calculate consumption C (d) Calculate investment I (2) Suppose the government decreases G from 10 to 6. What will be the new equilibrium level of Y and r? (a) r= (b) Y= (3) Suppose the new level of money supply is M = 240 (while G stays at 10), what is the new equilibrium level of Y and r? (a) r= ( b ) Y= QUESTION 11 Suppose the production function of a country is Y = K 3 L 3 ". And its capital stock is K = 27 and labor force is $ = 64. Calculate the following (Enter only numbers. Round up to ONE decimal place if needed) (a) What is the labor market clearing real wage under flexible real wage? (b) What is the number of the unemployed under rigid real wage W 2 . P

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!

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....

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...

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...

= 1. Consider an open economy given by the following. Production Function: Y = 10K;"(L), Consumption Function: Ct = 120 + 6Y dt, Investment Function: I1 = 250 - 1000rt, Demand for Money: L 4Y, Net...

1. Which of the following statements is/are true? I. In macroeconomics, stocks and bonds are examples of money. II. In macroeconomics, money serves the role of a medium of exchange. A. Only I is...

(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...

Hi I need help answering all the parts of question 3. I really just need the answers. 3. Was Out . Consider the economy of Hicksonia. a. The consumption function is given by C = 300 + 0.6(Y - T). The...

help the quiz is okay A positive externality of $120 per unit has been associated with the market described by the following equations: Supply: Qs = 2P - 100 Demand: Qd = 500 -P. In order to...

Answer the following attached questions. (Production function) Condsider a representitive rm with a. production function which is ( i) twice continuously dierentiable; (ii) exhibits positive and...

Consider the sampling distribution of given in Table 7.5. a. Calculate the value of using the formula = P(). Is the value of calculated in Exercise 7.6 the same as the value of calculated here?...

Of 1,000 respondents aged 24 to 35, 65% reported that they preferred to "look for a job in a place where I would like to live" rather than "look for the best job I can find, the place where I live is...

Consider the following yields to maturity on various oneminus year zerominus coupon securities: Security Yield ( % ) Treasury 4 . 6 AAA corporate 4 . 8 BBB corporate 5 . 6 B Corporate 6 . 2 Wyatt Oil...

In your opinion, since the coronavirus pandemic has become prevalent in the U.S. since March 2020, has anti-Asian sentiment in the workplace increased? Why or why not?

6. How great is the time-lag between when an event occurs until we get information about it?

1. Build trust and share information with others.

11. What types of information collected are most frequently used in decision-making?