Given the following economy Cd-200+ 0.8Y - 500r Id=200-500r a). Suppose that the real interest rate...

 

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Given the following economy Cd-200+ 0.8Y - 500r Id=200-500r a). Suppose that the real interest rate r in equilibrium is 0.2. What is the government spending G of this economy so that its full-employment output Y equals 1000? (hint: Use AE-Y to find G). b). Suppose M³=8000 and 1-0.2. Suppose the real balance of money demand is given by L(Y, r)=0.75Y- 250r. What is the price level P in this economy for Y=1000? c). Please draw your IS-LM curves in the graph. Use the graph to illustrate what may happen if the economy has an adversary price shock, such as an oil price hike. Given the following economy Cd-200+ 0.8Y - 500r Id=200-500r a). Suppose that the real interest rate r in equilibrium is 0.2. What is the government spending G of this economy so that its full-employment output Y equals 1000? (hint: Use AE-Y to find G). b). Suppose M³=8000 and 1-0.2. Suppose the real balance of money demand is given by L(Y, r)=0.75Y- 250r. What is the price level P in this economy for Y=1000? c). Please draw your IS-LM curves in the graph. Use the graph to illustrate what may happen if the economy has an adversary price shock, such as an oil price hike.

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