Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumptionand investment functions are, respectivley,C = 100 + 0.8(Y –- T),I = 100 – 2000r,%3Dthat is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is200iThe government is currently implementing a policyĞ = 80,T = 50,%3Dand the central bank (CB) is supplying M = 1000.Expected inflation is aº = 0.Suppose that pre-Covid, short-run output was equal to long-run output at Y = 1000. Fill in the following table that describes this short-runequilibrium. That is, solve for the values of the nominal interest rate, short-run price level, consumption, and investment.I'%

C = 100 + 0.8(Y-T) I = 100-2000r G = 80 T = 50 Since, rate of inflation is 0, therefore, nominal…

Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C = 100 + 0.8(Y – T), I = 100 – 2000r, %3D that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is 200i The government is currently implementing a policy Ğ = 80, T = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is a“ = 0. Suppose that pre-Covid, short-run output was equal to long-run output at Y = 1000. Fill in the following table that describes this short-run equilibrium. That is, solve for the values of the nominal interest rate, short-run price level, consumption, and investment. i* P* C' I'

Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C = 100 + 0.8(Y – T), I = 100 – 2000r, %3D that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is 200i The government is currently implementing a policy Ğ = 80, T = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is a“ = 0. Suppose that pre-Covid, short-run output was equal to long-run output at Y = 1000. Fill in the following table that describes this short-run equilibrium. That is, solve for the values of the nominal interest rate, short-run price level, consumption, and investment. i* P* C' I'

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the long-run level of output is Y = 1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C = 100 + 0.8(Y – Ť), 1- 100— 2000г, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is M. 200 The government is currently implementing a policy G = 80, Ť = 50, and the central bank (CB) is supplying M = 1000. Expected inflation is T° = 0. Continuing from Part 1, due to the uncertainty surrounding the coronavirus, consumers tighten their belts and consumption function changes to C = 40 + 0.8(Y – T). Focus only on the economy's short-run responses, that is, when the price level P cannot adjust. Derive the new IS curve. It should be written in the form Y = A - Bi, that is, you only need to solve for the values of A = and
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