équations: MP Curve: r = 1 + 0.5 T 1400 300r, IS Curve: Y = Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is the inflation rate in percentage points. Assume that the inflation rate in the economy decreases from 2.5 to 2%. Calculate the b) change in real GDP and show this effect on graphs of the MP, IS and AD curves (make sure to indicate all intercepts and labels in your graphs).
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- An economy is described by the following equations:Expenditure Sector: Money Sector:S = - 200 + (1/5)YD Ms = 400TA = (1/8)Y - 40 Md = (1/4)Y + 100 - 5iTR = 60I = 300 – 10iG = 70 NX = 150 - (1/5)YHere S is saving; TA is taxes; TR is transfers; I is investment; G is government spending; NX is net exports; Ms is money supply; and Md is money demand.a) Find the IS and LM equations for this economy. Draw those equations in an IS-LM framework.b) Find the equilibrium level of output and interest rates. Calculate also the equilibrium values of investment (I), net exports (NX), and money demand (md)Exercise 11.11 Optional: Suppose the central bank's monetary policy sets the interest rate accord- ing to the function: i = 3.0+2.0(T – T*) with a* = 4.0, and aggregate expenditure is the sum of: C= 200+0.75Y I = 85 – 2i G= 100 X – IM = 50 -0.15Y-3i (a) What is the equation for the ADA curve? (b) Plot the ADn curve in a diagram, not necessarily to scale, that shows the horizontal intercept and slope of the curve.Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.
- Due to some negative news concerning the impact of global warming on the economy, consumers are becoming more pessimistic about the future to the point of reducing autonomous consumption by 50. What is the immediate impact on income before the economy adjusts to its new equilibrium? What are the economy’s equilibrium level of output Y and interest rate r following the fall in autonomous consumption? Compute the equilibrium level of consumption and investment spending. With the help of the IS/LM graph, carefully explain what happens to the economy following the fall in consumer confidence.Provide an analysis for the below graph that I generated for the following question. What is the effect of an increase in the Treasury bill rate rising from 7% to 8%, and the government bonds rate from 9% to 11%? Plot the trajectory of GDP, and discuss it.The discussion should not be less than two paragraphs. For your simulation: simulate the model for the period 1900-2000, and shock the interest rates in 1930. The plot should present the trajectory of the GDP from the original steady state (with interest rates 7% and 9%) to the new one. find the trajectory below.n year 2018, the government of Qatar spent is 143 billion Qatari Riyal (the national currency of Qatar). The GDP of Qatar in the same year is 1,121 billion Qatari Riyal. Qatar's desired consumption and desired investment during the year can be summarized by the following equations: Cd=1,000-5,000r Id=800-3000r Where Cd is the desired consumption in billions of Qatari Riyal, Id if the desired investment in billions of Qatari Riyal, and r is the real interest rate in decimal form. What is the equilibrium real interest rate r* in %? round to at least 2 decimal places
- An economy is described by the following set of equations: C = 2,600 + 0.8(Y – T) – 5,000r, I = 3,000 – 15,000r, G = 800, X = M = 0, T = 1,000 + 0.3Y. The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). Suppose the flow of GDP consistent with full employment is 10,000. What real interest rate would achieve full employment?An economy is described by the following equations: C = 2,600+ 0.8 (Y- T) - 10,000r IP = 2,000 10,000r G = 1,800 NX = 0 T = 3,000 The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). a. Find a numerical equation relating planned aggregate expenditure to output. Instructions: Enter your response for mpc rounded to one decimal place. PAE=+ 0.8 Y b. Using a table (or algebra if you have used the appendix to this chapter), solve for short-run equilibrium output. Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Leave no cells blank. You must enter 'zero' for the answer to grade correctly. Output Y 9,500 9,600 9,700 9,800 9,900 10,000 10,100 10,200 Planned aggregate expenditure (PAE) Short-run equilibrium output: Y PAERefer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve, respectively. 10 AS Investment Demand AD, (=120) AD, (1=90) AD, (I=60) $30 60 90 120 150 Q, Real GDP ($) Investment ($) All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point B on the investment demand curve. To achieve the long-run goal of a noninflationary full-employment output Qf in the economy, the Fed should: 1) Decrease the interest rate from 10 to 8 percent 2) Decrease the interest rate from 8 to 6 percent 3) Decrease the interest rate from 6 to 4 percent 4) Increase investment spending from $30 to $60 billion Interest Rate (%) Price Level
- Assume the following model of the economy: Y = C + I + G C = 120 + 0.5(Y - T) I = 100 - 10r G = 50 T = 40 Md = Y - 20 r Ms = 600 P = 2 Graph both the IS and the LM curves. Use r = 5, 10, 15 What are the equilibrium level of income and equilibrium interest rate?2. An economy is initially described by the following equations: C= 600 + 0.75(Y - T) I= 1,200 – 50i M/P = Y – 200i G= 2000 %3D T= 2000 M = 4,000 P = 2 a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. b. Suppose that a newly elected president cuts taxes by 20 percent. Assuming the money supply is held constant, what are the new equilibrium interest rate and level of income? What is the tax multiplier? 1 c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. d. What is the new level of income? What must the new money supply be? What is the tax multiplier? e. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier?Suppose that Marvel Kingdom economy is characterized by the following equations. Aggregate consumption: C = 100 + 0.75Y, Investment: I = 500– 5r Government spending on goods and services: G = 200 Lump-sum tax: Net Export: T = 300 NX = 200 Interest rate: : r = 5% Yp is disposable income, Y is real output, while r is interest rate (in percentage). Yp, Y, C, I, G, T, and NX are in trillions Marvel Dollar (MD) Solve for the initial equilibrium output (Y,) and find the economic multiplier. If the government aims for a target output level (Y,) of MD 3500 trillion, how much will output increase and how much should the government set its spending to achieve the targeted output level?