7. Given the following: C(YT) 200+ 0.75(Y-T) I(r) = 80 - 20r L(r,Y)=Y-90r G = 200 T = 75 M = 2500 P = 4 = c) What is the equilibrium output level Y*? d) What is the equilibrium interest rate r*?
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- Suppose the cotton (a storable commodity) futures prices are currently Expiry Month Price c/lb December 2021 83 December 2022 96 (a) Suppose an unexpected typhoon destroys cotton crops in India. This causes a downward revision in the expected global cotton production in 2022. Assuming all else equal, will demand for storage of cotton in 2021 (St) increase, decrease or stay the same? Draw a graph of the demand for storage to support your answer. (b) Using the same scenario from (a), do you expect the cotton market to still in contango, inverted, or could it be either contango or inverted? Draw a graph of supply and demand for storage to support your answer.How many points (out of the 6 shown) can be explicitly plotted to form the IS curve given the goods market equilibrium?A goods market equilibrium is shown below: A, B, C, D, E, F 32- A goods market equilibrium is shown below: S₁ (Y= 400) 28- Real Interest Rate, r (%) S2(Y=600) S3 (Y = 800) 226 24- A 20- B C 16- 12- E 4- 0- 0 l(r) F 50 100 150 200 250 300 Desired national saving / desired investment We recommend that you drow out the IS curve before answeringC = 100 + 0.8(1- t)Y I = 200 - 1000i L = 1/2Y - 7000i G = 700 t = 0.33 M/ P = 500 a) find the equilibrium Level of income b) find the equilibrium level of interest rate
- Suppose the economy is operating at potential GDP when It experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. Supply Demand 100 200 300 400 500 LOANABLE FUNDS (Billions of dollars) A INTEREST RATE (Percent) m 0 0 6004) Distinguish between the short-run and long-run factors that affect residential investment.
- INTEREST RATE (Percent) 12 11 10 9 co 5 4 3 2 1 0 Supply Demand 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 LOANABLE FUNDS (Billions of dollars) ? Investment is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied decreases Suppose the interest rate is 5.5%. Based on the previous graph, the quantity of loanable funds supplied is greater than the quantity of loans demanded, resulting in a surplus of loanable funds. This would encourage lenders to lower the interest rates they charge, thereby decreasing the quantity of loanable funds supplied and increasing the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of 5%Assume that GBP|USD = 2.00 (rate chosen for math ease). After the passage of a significant tax increase in the United States, the United States stock market is expected to drop significantly over the next month while the British stock market is expected to show steady growth. As a result which of following is most likely in a graph of the currency market with GBP per USD (original equilibrium is USD|GPB = 0.50) on the vertical axis (quantity of USD on horizontal axis)? Drawing a diagram would be useful. A. The supply curve would shift left and the new price would be greater than 0.50. B. The supply curve would shift right and the new price would be greater than 0.50. C. The supply curve would shift left and the new price would be less than 0.50. D. The supply curve would shift right and the new price would be less than 0.50.QUESTION ONE Assume the following functions are for the goods market of a hypothetical economy: (1) I= 150 – 10r; (2) C=700+0.8Yd (3) T=50+0.25Y (4) G=180 Note: Y is income and r is the interest rate a) Derive the IS aurve for this economy. b) Use appropriate scale to sketch the IS aurve is part (a) above. c) Determine and interpret the slope of the IS aurve in part a) above. d) Explain how a change in each of the following will affect the IS curve in part a) above: A balance budget increase in government expenditure of 60 units. An increase autonomous consumption to 800 units An increase in the interest sensitivity of investment to 20. An increase in the marginal propensity to save to .025. A decrease in the marginal tax rate to 0.15. i) ii) iii) iv)
- Identify the effect of recession in the economy on either demand or supply curve and the equilibrium interest rates. kindly use a graph in your explanation.Please note that the bold red and blue lines below demonstrate the quantity versus price relationship for supply and demand in normal circumstances for a particular product. Note: The horizontal axis is quantity, and the Vertical axis is price. 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 -Curve A -Curve B 0 Supply and Demand Curves: →→ Curve C 5 10 15 20 25 30 35 40 --Curve D ---Curve E -Curve F 45 50 55 60 65 70 75 80 85 90 95 100 105What is the cross-rate implied by the following quotes? a. C$/$ = 1.5613, $/€ =1.0008 b. ¥/$ = 124.84, $/£=1.5720 c. SF/$ = 1.4706, C$/$ = 1.5613