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johnpaul92 johnpaul92
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8 years ago
A classical economy is described by the following equations:
C to power of ((d)) = 500 + 0.5(Y - T) - 100r.
I to power of ((d)) = 350 - 100r.
L = 0.5Y - 200i.
overbar(Y) = 1850.
π to power of ((e)) = 0.05.
Government spending and taxes are equal where T = G = 200. The nominal money supply M = 3560.
(a)   What are the equilibrium values of the real interest rate, the price level, consumption, and investment?
(b)   Suppose an economic shock increases desired investment by 10, so it is now I to power of ((d)) = 360 - 100r. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?
(c)   Returning to the initial situation in part (a), suppose an economic shock increases desired consumption by 10, so it is now C to power of ((d)) = 510 + 0.5 (Y - T) - 100r. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?
Textbook 
Macroeconomics

Macroeconomics


Edition: 8th
Authors:
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supamansupaman
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johnpaul92 Author
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#2
8 years ago
This is incredible, wasn't expecting anyone to answer this one
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#3
8 years ago
Every little bit helps, right? Glad I solved your question
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