Consider the following long-run model: Real GDP (Y) = 2,000; Consumption (C) = 300 + 0.6...

Consider the following long-run model: Real GDP (Y) = 2,000; Consumption (C) = 300 + 0.6 (Y-T); Investment (I) = 500 -30r where r is the real interest rate; Taxes (T) = 450; Government spending (G) = 400. i. Compute consumption, private savings, public savings, national savings, investment and the real interest rate.

Expert Solution

Rahul Sunny answered 2 years ago

Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function...

Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function is: I=700-80r. Government purchases and taxes are both 500. For this economy, graph the IS curve for r changing from 0 to 8 b) The money demand function in Hicksonia is (M/P)^d=Y-200r. The money supply M is 3000 and the price level P is 3. For this economy, graph the LM curve for r changing from 0 to 8. c) Find the equilibrium interest...

A. Assume that GDP (Y) is 6,000B. Consumption (C) is given by the equation C =...

A. Assume that GDP (Y) is 6,000B. Consumption (C) is given by the equation C = 600B + 0.8(Y – T). Investment (I) is given by the equation I = 2,000B – 100B(r), where r is the real rate of interest. Taxes (T) are 500B and government spending (G) is also 500B. Show/type your work/calculations! 1. In this economy, compute private savings, public savings, and national savings (6 points) Private savings = Public savings = National savings...

(15pt) Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C =...

(15pt) Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C = 1,200 + 0.3(Y – T) – 50r, where r is the real interest rate, in percent. Investment (I) is given by the equation I = 1,500 – 50r. Taxes (T) are 1,000, and government spending (G) is 1,500. Here, notice that C is negatively related to the real interest rate. a)What are the equilibrium values of C, I, and r? (3pt) b)What are the...

Assume that GDP (Y) is 10,000. Consumption (C) is given by the equation C = 500...

Assume that GDP (Y) is 10,000. Consumption (C) is given by the equation C = 500 + 0.8(Y – T). Investment (I) is given by the equation I = 2,000 – 50r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 500. a. What are the equilibrium values of C, I, and r? (Show your work) (4.5 marks) b. What are the values of private saving, public saving, and...

what will happen to price level and Real GDP in the long run if the money...

what will happen to price level and Real GDP in the long run if the money supply increases?

Aggregate Expenditure Practice Problem #1 Consider the following AE model: C=.75Yd+ 300 Yd = Y –...

Aggregate Expenditure Practice Problem #1 Consider the following AE model: C=.75Yd+ 300 Yd = Y – T I=100 G=50 T=40 M=50 X=65 1. Find the following: Y* = MPC = MPS = Budget Deficit = Trade Surplus = Autonomous C = At Y*, C = At Y*, I = At Y*, G = At Y*, T = At Y*, net exports = At Y*, Savings = Leakages = Injections = 2. Using the ∆RGDP equation, compute the new Y* if...

A closed economy can be described by the long-run classical model: Y = 2KαL1–α C =...

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Assume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by...

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Full Employment Model: Consider the long-run model of the economy and answer the following questions: a....

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