PLease answer all of the questions that are listed on the attached image.Thanks! 4. Consider a classical economy described as follows:1 1Y = LK², where L is the amount of labor and K is the amount of capital. The economyhas 10,000 units of labor and 10,000 units of capital.Consumption (C): 5,020-100r, Investment (I): 2,000-100r, Taxes (T): 2,500, GovernmentPurchases (G) :3,000a. Compute the total production and find the equilibrium interest rate.b. Compute private saving, government saving, and national saving.c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. Whathappens to consumption, private saving, government saving, national saving andinvestment?5. An economy has a monetary base of 100$ bills. People hold equal amounts of currencyand demand deposits. Banks has 20% of deposits as reserves.What is the money multiplier? Compute the money supply.b. The central bank decides to increase the money supply by 10%. How much should itincrease the monetary base?a.

An economy has a monetary base of 100$ bills. People hold equal amounts of currency and demand deposits. Banks has 20% of deposits as reserves. a. What is the money multiplier? Compute the money supply. b. The central bank decides to increase the money supply by 10%. How much should it increase the monetary base?

An economy has a monetary base of 100$ bills. People hold equal amounts of currency and demand deposits. Banks has 20% of deposits as reserves. a. What is the money multiplier? Compute the money supply. b. The central bank decides to increase the money supply by 10%. How much should it increase the monetary base?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 3PA

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b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.
4. Consider a classical economy described as follows: Y = LEK, where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I): 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000 a. Compute the total production and find the equilibrium interest rate. b. Compute private saving, government saving, and national saving. c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. What happens to consumption, private saving, government saving, national saving and investment? 5. An economy has a monetary base of 100$ bills. People hold equal amounts of currency and demand deposits. Banks has 20% of deposits as reserves. a. What is the money multiplier? Compute the money supply. b. The central bank decides to increase the money supply by 10%. How much should it increase the monetary base?
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