Consider an economy described by the following:C= $4 trillionĪG= $1.5 trillion== $3.0 trillionTNX= $3.0 trillion= $1.0 trillionF= 0mpc= 0.8d= 0.35x= 0.15λ= 0.5г= 2a.Derive expressions for the MP curve and the AD curve.b. Calculate the real interest rate and aggregate output when л=2 and π= 4.c. Draw a graph of the MP curve and the AD curve, labelling the points given in part (b).

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Answered: Consider an economy described by the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the year of 2019, the U.S. economy produced a total output of $20.75 trillion. During the same year, the U.S. federal government spent $7.88 trillion. The desired consumption and desired investment in the U.S. for the year is described by: Cd=15-150r, Id=10-200r Where Cd is the desired consumption in trillions of $, Id is the desired investment in trillions of $, and r is the real interest rate in decimal form. if the average real interest rate during the year 2019, is 4.1%, how much is the desired national saving, Sd, in trillions of $? round answer to at least 2 decimal places.
Revisited Fiscal and Monetary Policy The IS Curve represents the equilibrium in the goods market and the LM Curve represents the equilibrium in the money market. The following are the equations for the IS-LM curve: IS relation : Y = C(Y – T) + I(Y, r + x) + G LM relation : r = ?̅ Y=Output, C=Consumption, T=Tax, I=Investment, G=Government Expenditure; r=interest rate, x=risk premium. a. What is unconventional monetary policy? When the central bank should conduct this kind of monetary policy? Give an example of unconventional monetary policy. b. Draw the IS-LM movement of unconventional monetary policy and tell the story behind it.
Generally, the price level variations impact the overall aggregate demand positively or negatively. In this context, discuss various effects of decrease in price level on consumption, investment and net exports. Give examples to support your answer.
In late 2009 and early 2010, real disposable income DI began growing at a slow pace, and during the same period, the value of corporate stocks held by households rose somewhat. How do you think this affected aggregate real consumption?
Assume the following IS-LM model: expenditure sector: money sector: AD = C + I + G + NX I = 300 - 20i M = 700 C = 100 + (4/5)YD G = 120 P = 2 YD = Y - TA NX = -20 md = (1/3)Y + 200 - 10i TA = (1/4)Y By how much will the equilibrium level of income (Y) and the interest rate (i) change, if the Fed responds to an increase in government purchases of 160 by increasing nominal money supply to M' = 1,100?
State whether True/false.
IN a closed economy,The price level is fixed at 1. The money supply is 100. c= consumer expenditure; i=investment; g= government spending; t=taxes; r= interest rate; Md=demand for money; P= price level; y= real GDP.1. Calculate the equilibrium levels of interest rate and real GDP. 2. Calculate the equilibrium level of consumer expenditure. 3. Calculate the equilibrium level of investment.
Suppose that the following C, I, G, and NX is given by: C = 100 + 0.8OY G = 100 | = 200 NX = 300 - 0.05Y And suppose also that this leads to an AD & AS given by: AD: Y = 10,000 - 3p AS: Y = 2p In short-run (AD = AS) equilibrium, what is the National Savings Supplied (NS)?
1. Consider an economy described by the following data (in $ trillion): Č- 3.25; i- 1.3 ; G= 3.5: T-3.0; NX = -1.00; 7 = 1; mpc= 75; a= 0.3; 6=0.1 a. Drive a simplified expressions for the consumption function, the investment function, and the net export function. a. Drive the expression for the IS curve. b. If the real interest rate is r=2, what is the equilibrium output? If r= 5, what the equilibrium output? c. Draw the graph of the IS curve showing the answers from part (c) above. d. If government purchases increase to $4.2 trillion, what will happen to equilibrium output at r=27 What will happen to equilibrium output at r 5? Show the effect of the increase in government purchases in your graph from (d).
The accompanying graph displays an Aggregate Demand (AD), Aggregate Supply (AS), and Potential GDP curve. Please illustrate how stagflation can occur in this economy. Potential GDP AS AD Real GDP Price Level
Q15 Which of the following statements is consistent with a given (i.e., fixed) LM curve? Select one: a. A reduction in the interest rate causes money demand to decrease. b. A reduction in the interest rate causes investment spending to increase. c. An increase in output causes an increase in demand for goods d. An increase in output causes an increase in money demand.
Please answer on following questions

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