Refer to the model given below Model: AE=C+I+G+(X-M) C = 200+ 0.8Yd 1=245 -25i G = 310

Refer to the model given below 

  

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Model: AE=C+I+G+(X-M) C = 200+ 0.8Yd 1=245 -25i G = 310 X=145 M = 0.1Y T = 0.25Y Y = 2000 M, = 500 Ma = 900-100i (For ease of calculation, treat percentage interest as a whole number ex: 10% interest as i=10) Assume, unless otherwise state, that the economy falls into the Keynesian range of the SRAS Part A: Initial Equilibrium a) Exogenous and Engogenous variables. b) Determine i c) AEo d) z e) Multiplier f) Induced consumption g) Y* h) NX i) BB j) What is the size and the Type of the output Gap, if any. k) Without MP, FP, how would the economy return to equilibrium? 1) According to Keynes, why would that be difficult? Part B: Monetary Policy Suppose The central bank decides to increase MS up to 700. a) Determine the new i b) Change in AEo c) New equilibrium output d) What is the size and the Type of the output Gap, if any. e) In the formulation of this model, can MP solely close gap? Why? Model: AE=C+I+G+(X-M) C = 200+ 0.8Yd 1=245 -25i G = 310 X=145 M = 0.1Y T = 0.25Y Y = 2000 M, = 500 Ma = 900-100i (For ease of calculation, treat percentage interest as a whole number ex: 10% interest as i=10) Assume, unless otherwise state, that the economy falls into the Keynesian range of the SRAS Part A: Initial Equilibrium a) Exogenous and Engogenous variables. b) Determine i c) AEo d) z e) Multiplier f) Induced consumption g) Y* h) NX i) BB j) What is the size and the Type of the output Gap, if any. k) Without MP, FP, how would the economy return to equilibrium? 1) According to Keynes, why would that be difficult? Part B: Monetary Policy Suppose The central bank decides to increase MS up to 700. a) Determine the new i b) Change in AEo c) New equilibrium output d) What is the size and the Type of the output Gap, if any. e) In the formulation of this model, can MP solely close gap? Why?

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Lets break this down step by step Part A Initial Equilibrium a Exogenous variables G X T Yp M5 Md l ... View the full answer