Question
In: Economics
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 to 3 percent.
(G is again 2,500.) Solve for private saving, public saving,
national saving, investment, the trade balance, and the equilibrium
exchange rate. Explain what you find.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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....
An economy is initially described by the following equations: C=500+0.75(Y−T) I=1,000−50r M/P=Y−200r G=1,000 T=1,000 M=6,000 P=2...
An economy is initially described by the following
equations:
C=500+0.75(Y−T) I=1,000−50r M/P=Y−200r G=1,000
T=1,000 M=6,000
P=2
Y,C,I,G& T are all in billions of dollars.
1. Derive and graph the IS curve and the LM curve. Calculate the
equilibrium interest rate and income. Label that point A on your
graph.
2. To mitigate the economic impact of COVID_19 on the economy,
suppose the government cuts taxes by 20 percent. Assuming that the
money supply is held constant, what are the new...
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 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...
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...
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...
A small open Economy is described by the following equations: C= 50 + 0.75(Y – T),...
A small open Economy is described by the following
equations:
C= 50 + 0.75(Y – T), I = 200-20r,
NX = 200-e, M/P = Y-40r, G= 200, T = 200, M = 3,000, P = 3,
and r* = 5
A. Drive the IS* and LM* equations
B. Calculate the equilibrium Exchange Rate, level of income, and
net exports
C. Assume a floating exchange rate, calculate what happens to
exchange rate , the level of income, net exports, and money...
c = 100 + 0.8 (y - t) i = 500 - 50r g = 400...
c = 100 + 0.8 (y - t)
i = 500 - 50r
g = 400
t = 400
Md = P(0.2y + 500 – 25r)
Price level is fixed at 1.
The money supply is 520
The government increases taxes by one unit.
Calculate the shift of the IS curve.
What is the change in the level of aggregate demand?
What is the change in the interest rate and investment?
What is the change in disposable income and consumer...
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