Consider the following economy: Desired consumption: Desired investment: Real money demand: Full-employment output: Expected inflation: Initially...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the following economy: Desired consumption: Desired investment: Real money demand: Full-employment output: Expected inflation: Initially the levels of taxes, government purchases and money supply were, T= G = 500 and M = 460. Initially, the equations for the IS, LM, and the aggregate demand curves were, IS: Y = 5360 -2,250.00r 1 LM: AD: Y= 2833 + 2190 Y = + Y = Initially, the general equilibrium values of output (Y), the price level (P), the real interest rate (r), consumption (C), and investment (/) were: Y = 5000, P = 1.01, r= 16.00%, C = 4,276.0, 1 = 224.0. Now suppose that T = G = 500, but money supply changes to M₂ = 230. Determine the equation for the new aggregate demand curve. (First you need to derive the new IS and LM equations. Use these equations to derive the new AD equation.) Aggregate demand equation: (Enter your responses rounded to the nearest whole number.) A Given that the full-employment output is unchanged at 5000, determine the general equilibrium values of output, the price level, real interest rate, consumption and investment. (Enter your response rounded to the nearest integer.) (Enter your response rounded to two decimal places.) %. (Enter your response as a percentage rounded to two decimal places.) (Enter your response rounded to one decimal place.) (Enter your response rounded to one decimal place.) P = Y = 4600 r= C= cd= 700+ 0.80(Y-T)- 150r d=272-300r L = 0.1 Y 250i Y = 5000 T² = 0 1 = + 2500r (A) Consider the following economy: Desired consumption: Desired investment: Real money demand: Full-employment output: Expected inflation: Initially the levels of taxes, government purchases and money supply were, T= G = 500 and M = 460. Initially, the equations for the IS, LM, and the aggregate demand curves were, IS: Y = 5360 -2,250.00r 1 LM: AD: Y= 2833 + 2190 Y = + Y = Initially, the general equilibrium values of output (Y), the price level (P), the real interest rate (r), consumption (C), and investment (/) were: Y = 5000, P = 1.01, r= 16.00%, C = 4,276.0, 1 = 224.0. Now suppose that T = G = 500, but money supply changes to M₂ = 230. Determine the equation for the new aggregate demand curve. (First you need to derive the new IS and LM equations. Use these equations to derive the new AD equation.) Aggregate demand equation: (Enter your responses rounded to the nearest whole number.) A Given that the full-employment output is unchanged at 5000, determine the general equilibrium values of output, the price level, real interest rate, consumption and investment. (Enter your response rounded to the nearest integer.) (Enter your response rounded to two decimal places.) %. (Enter your response as a percentage rounded to two decimal places.) (Enter your response rounded to one decimal place.) (Enter your response rounded to one decimal place.) P = Y = 4600 r= C= cd= 700+ 0.80(Y-T)- 150r d=272-300r L = 0.1 Y 250i Y = 5000 T² = 0 1 = + 2500r (A)
Expert Answer:
Related Book For
Macroeconomics
ISBN: 978-0321675606
6th Canadian Edition
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
Posted Date:
Students also viewed these economics questions
-
A block is pressed against a vertical wall by a force F, as the drawing shows. P This force can either push the block upward at a constant velocity or allow it to slide downward at a constant...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
1. In the classical model, it is thought that the long-run: A. and short-run aggregate supply curves are both upward sloping. B. aggregate supply curve is vertical and the short-run aggregate supply...
-
Refer to all of the facts in Problem 12-6. Required 1. Using the format in the chapters appendix, prepare a statement of cash flows work sheet. 2. Prepare a statement of cash flows for 2014 using the...
-
In May 2007, Fred Parramore executed four deeds, each conveying a life estate in his land to him and his wife and a remainder interest in one-fourth of his land to each of his four children: Alney,...
-
McFriendly Software recently developed new spreadsheet software, Easy-Calc, which it intends to market by mail through ads in computer magazines. Just prior to introducing Easy-Calc, McFriendly...
-
Outsourcing production decision (Learning Objectives 1, 6)} Suppose an Olive Garden restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local...
-
A consumer has $400 to spend on goods X and Y. The market prices of these two goods are Px = $10 and Py = $40. a. What is the market rate of substitution between goods X and Y? b. Illustrate the...
-
I need this problem done in 3 hours. I need correct work. Linda Watson has recently accepted a position as the assistant administrator for the department of nursing at St. Joseph Hospital. There have...
-
The information provided in this test allows you to set up the Cieneral, Payables and Receivables ledgers for an Ontario company named CHRIS'S WELDING owned and run by Chris George, amaster welder....
-
DEF Inc. produced 50,000 units during the month. Total manufacturing costs, including direct materials, direct labor, and factory overhead, amounted to $1,000,000. If the ending inventory was valued...
-
Just for You Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $40 with $30 in variable costs of goods sold. The company has fixed...
-
What role does leadership style play in nurturing or eroding organizational commitment, and which specific leadership practices are most effective in this regard ?
-
During the year ended October 31, 2017, the following transactions occurred: a. Purchased $550,000 of merchandise; terms 2/10, n/30. b. Sold merchandise for cash; $815,000 (cost of sales $509,000)....
-
Describe policies that are not directly related to water and sanitation coverage that would have an impact on water, sanitation, hygiene, and health. Brainstorm: What levers might be pulled to...
-
Shown below is information relating to the stockholders' equity of Oyster Bay, Inc. at December 31, 2023. 11% cumulative preferred stock, $130 par, 100,000 shares authorized, 10,000 shares issued...
-
Question 24 Projected financial statements can be used to assess the sensitivity of all of the following except: Select one OA. a firm's liquidity. B. a firm's leverage to changes in assumptions. C....
-
Use the method of Example 4.29 to compute the indicated power of the matrix. 1 0 1
-
For constant output, if real money supply exceeds the real quantity of money demanded, what will happen to the real interest rate that clears the asset market? In describing the adjustment of the...
-
Define full-employment output. How is full-employment output affected by an increase in labour supply? by a beneficial supply shock?
-
Given income, how are consumption and saving linked? What is the basic motivation for saving?
-
Use of probabilities to estimate profit Vernon Enterprises designs and manufac- tures toys. Past experience indicates that the product life cycle of a toy is 3 years. Promotional advertising produces...
-
Optimum prices and quantities in curvilinear CVP Anyway Inc. has been able to quantify its demand and cost equations as: Quantity Total cost 10,000 - 40 Price, $10,000+.20 x Quantity
-
For many new products or production processes, some amount of initial production time is required before labor efficiency reaches an acceptable level. During the learning process, the time required...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App