Question
In: Economics
Consider a classical economy described by the following equations Y = C + I + G...
Consider a classical economy described by the following equations
Y = C + I + G
Y = 6000
G = 1200
T = 0
C = 3600 – 2000 r + 0.1 Y
I = 1200 – 4000 r
a. Develop an equation relating national savings to r and y. (Hint solve for private savings and then public savings)
b. Find the real rates interest that clears the good market.
c. Suppose government produces rises to 1440. How does this alter national savings?
d. Find the new equilibrium rate of interest
e. Does investment change “I for I” one for one with the change in G? Why or why not? Explain.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Consider an economy described by the following equations: Y = C + I + G Y...
Consider an economy described by the following equations:
Y = C + I + G
Y = 5000
G = 1000
T = 1000
C = 250 + .75 (Y - T)
I = 1000 - 50r
a. In this economy, compute private saving, public saving, and
national saving
b. Find the equilibrium interest rate
c. Now suppose that G rises to 1250. Compute private saving, public
saving, and national saving
d. Find the new equilibrium interest rate.
Consider an economy described by the following equations: Y = C + I + G +...
Consider an economy described by the following equations: Y = C
+ I + G + NX Y = 8,100 G = 2,300 T = 2,100 C = 500 + 2/3 (Y – T) I
= 900 – 50r NX = 1,500 – 250e r = r* = 8.
a. (4 points) In this economy, solve for private saving, public
saving, national saving, investment, the trade balance, and the
equilibrium exchange rate.
b. (3 points) Suppose now that G is...
Consider an economy described by the following equations Y = C + I + G Y=4,000...
Consider an economy described by the following equations Y = C +
I + G Y=4,000 G= 1,000 T=800 C =400 + 0.75(Y–T) I = 1,000–50r(a)
For this economy, compute the following [1.5 Points each; 6 Points
total]1. Private Savings2. Public Savings3. National Savings4.
Equilibrium interest rate
(b) Is this economy running a budget surplus, budget
deficit or a balanced budget? Explain.
[2 Points]
(c) Suppose that
Congress
decides to reduce government spending.
The new level of government spending is...
Equilibrium in the Classical model: Consider an economy described by the following equations: Y = C...
Equilibrium in the Classical model: Consider an economy
described by the following equations:
Y = C + I + G
Y = 12,000
G = 2,000
T = 2,000
C = 500 + 0.75*(Y – T)
I = 2,400 – 80*r
a) In this economy, compute private saving, public saving, and
national saving.
b) Find the equilibrium real interest rate r.
c) Now suppose that G rises to 1,200. Compute private saving,
public saving, and national saving in this case....
Consider an economy described by the following equations: Y =C+I+G+NX, Y =5,000, G = 1, 000,...
Consider an economy described by the following equations:
Y =C+I+G+NX, Y =5,000,
G = 1, 000,
T = 1, 000,
C =250+0.75(Y −T), I = 1, 000 − 50r,
NX = 500 − 500ε, r = r∗ = 5
(a) In this economy, solve for national savings, investment, the
trade balance, and the equilibrium exchange rate.
(b) Suppose that G rises to 1,250. Solve for national saving,
investment, the trade balance, and the equilibrium exchange rate.
Explain what you find....
Consider a classical model of large-open economy described by the following equations: Y = C +...
Consider a classical model
of large-open economy described by the following
equations:
Y = C + I + G + NX
Y = 8,000
G = 2,500
T = 2,000
C = 500 + 2/3 (Y − T)
I = 1,000 − 50r
CF = 500 − 50r
NX = 1,000 − 250ε
where Y is output, C is
consumption, I is investment, G is government purchases, NX is net
exports, T is taxes, r is the real interest rate,...
Consider an economy described by the following equations: Y=C+I+G+NX, Y=8,000 G=2,500 T=2,000 C=500 + 0.75(Y−T) I=900−50r...
Consider an economy described by the following
equations:
Y=C+I+G+NX,
Y=8,000
G=2,500
T=2,000
C=500 + 0.75(Y−T)
I=900−50r
NX=1,500−250ϵ
r=r∗=8.
In this economy, solve for private saving, public saving,
national saving, investment, the trade balance, and the equilibrium
exchange rate.
Suppose now that G is cut to 2,000. Solve for private
saving, public saving, national saving, investment, the trade
balance, and the equilibrium exchange rate. Explain what you
find.
Now suppose that the world interest rate falls from 8 to 3
percent....
Consider an economy described by the following equations: Y=C+I+G+NX, Y=8,000 G=2,500 T=2,000 C=500 + 0.75(Y−T) I=900−50r...
Consider an economy described by the following
equations:
Y=C+I+G+NX,
Y=8,000
G=2,500
T=2,000
C=500 +
0.75(Y−T)
I=900−50r
NX=1,500−250ϵ
r=r∗=8.
a.
In this economy, solve for private saving, public saving, national
saving, investment, the trade balance, and the equilibrium exchange
rate.
b.
Suppose now that G is cut to 2,000. Solve for private saving,
public saving, national saving, investment, the trade balance, and
the equilibrium exchange rate. Explain what you find.
c.
Now suppose that the world interest rate falls from 8...
1. Consider an economy described by the following equations: Y=C+I+G, Y=K1/3 L2/3 K= 1000 and L=...
1. Consider an economy described by the following equations:
Y=C+I+G, Y=K1/3 L2/3
K= 1000 and
L= 1000 and
G= 300
T= 200
C= 250 + 0.5(Y-T)-50r,
I= 300-50r.
a) With investment I on the x-axis and r on the y-axis, plot the
investment function
b) Solve for private savings and national savings as a function
of r. Does national savings increase as r increases? Explain.
c)Solve for consumption, private saving, investment and interest
rate in the equilibrium.
d) Now suppose...
Consider the economy described by the following equations: Y = 2400; C = 100 + 0.75(Y...
Consider the economy described by the following equations:
Y = 2400;
C = 100 + 0.75(Y – T) –
10r;
I = 450 – 15r;
G = 250;
NX = 0;
T = 0;
Use the information above to calculate an expression (equation)
for national saving S as a function of the real interest
rate r.
Calculate the goods market equilibrium real interest rate, and
levels of desired national saving and investment, and
consumption.
Calculate government (or public) saving. Comment...
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