Given the following equations and assuming these equations accurately describe the economy: C = 400 + 0.75(Y – T) | = 1,000 – 150r G = 400 and T= 400 = 350 P = 1 (fixed) = 0.25Y - 50r where C = consumption spending, Y = Income = Output, I = investment spending, G = government %3D spending, T = net taxes, Ms = money supply, P = price level, r = the interest rate, and (M/P)D = real money demand Derive the IS and LM equations and use them to calculate equilibrium values for the interest rate and income (you are encouraged to sketch a graph on your scratch paper to help you work through the analysis). Equilibrium interest rate (r) = percent Equilibrium income (Y) = $ Suppose government spending is increased from 400 to 500 with no change in taxes. Derive the new IS equation and calculate the new equilibrium values. Equilibrium interest rate (r) percent Equilibrium income (Y) = $ The amount of income crowded out equals $

Given the following equations and assuming these equations accurately describe the economy: C = 400 + 0.75(Y – T) | = 1,000 – 150r G = 400 and T= 400 = 350 P = 1 (fixed) = 0.25Y - 50r where C = consumption spending, Y = Income = Output, I = investment spending, G = government %3D spending, T = net taxes, Ms = money supply, P = price level, r = the interest rate, and (M/P)D = real money demand Derive the IS and LM equations and use them to calculate equilibrium values for the interest rate and income (you are encouraged to sketch a graph on your scratch paper to help you work through the analysis). Equilibrium interest rate (r) = percent Equilibrium income (Y) = $ Suppose government spending is increased from 400 to 500 with no change in taxes. Derive the new IS equation and calculate the new equilibrium values. Equilibrium interest rate (r) percent Equilibrium income (Y) = $ The amount of income crowded out equals $

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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