Question: Hi, could you help me solve this please? It is a question for a seminar a. According to the Keynesian cross model, if the marginal

Hi, could you help me solve this please? It is a question for a seminar

a. According to the Keynesian cross model, if the marginal propensity to consume is 4/7, an increase in government purchases of 120 billion Euro increases equilibrium income by how much? (2p) For question b, c and d. Suppose the money demand function is (M/P) = 800-40r, where r is the interest rate, as a percentage. The money supply M is 2000, and the price level P is fixed at 4. b. What is the equilibrium interest rate? (2p) c. What happens to the equilibrium interest rate if the money supply is up to 2500? (2p) d. If the central bank wants the interest rate to be 5%, what money supply should it set? (2p)

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