Questión 3: Consider the economy of Ghana. The consumption function is given by C = 400 + 0.8(Y - T). The investment function is I = 600 - 70r. Government purchases is 400. Assume a balanced budget. The money demand function is (MP)d = Y - 180r. The money supply Mis 3,000 and the price level P is 3. a. Find the equilibrium interest rate r and the equilibrium level of income Y. b. Suppose that government purchases are increased from 400 to 600. What are the new equilibrium interest rate and level of income? c. Suppose instead that the money supply is increased from 3,000 to 3,500. What are the new equilibrium interest rate and level of income? d. With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What are the new equilibrium interest rate and level of income?

Questión 3: Consider the economy of Ghana. The consumption function is given by C = 400 + 0.8(Y - T). The investment function is I = 600 - 70r. Government purchases is 400. Assume a balanced budget. The money demand function is (MP)d = Y - 180r. The money supply Mis 3,000 and the price level P is 3. a. Find the equilibrium interest rate r and the equilibrium level of income Y. b. Suppose that government purchases are increased from 400 to 600. What are the new equilibrium interest rate and level of income? c. Suppose instead that the money supply is increased from 3,000 to 3,500. What are the new equilibrium interest rate and level of income? d. With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What are the new equilibrium interest rate and level of income?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Aggregate Demand And Aggregate Supply

Section8.2: Aggregate Demand

Problem 3ST

See similar textbooks

Similar questions

Consider the economy of Ghana.The consumption function is given by C = 400 + 0.8(Y - T).The investment function is I = 600 - 70r.Government purchases is 400. Assume a balanced budget.The money demand function is (M/P)d = Y - 180r.The money supply M is 3,000 and the price level P is 3.a. Find the equilibrium interest rate r and the equilibrium level of income Y.b. Suppose that government purchases are increased from 400 to 600. What are the newequilibrium interest rate and level of income?c. Suppose instead that the money supply is increased from 3,000 to 3,500. What are the newequilibrium interest rate and level of income?d. With the initial values for monetary and fiscal policy, suppose that the price level rises from3 to 5. What are the new equilibrium interest rate and level of income?Question
Consider the economy of Ghana.The consumption function is given by C = 400 + 0.8(Y - T).The investment function is I = 600 - 70r.Government purchases is 400. Assume a balanced budget.The money demand function is (M/P)d = Y - 180r.The money supply M is 3,000 and the price level P is 3.a. Find the equilibrium interest rate r and the equilibrium level of income Y.b. Suppose that government purchases are increased from 400 to 600. What are the new equilibrium interest rate and level of income?c. Suppose instead that the money supply is increased from 3,000 to 3,500. What are the new equilibrium interest rate and level of income?d. With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What are the new equilibrium interest rate and level of income?
Consider the economy of Ghana. The consumption function is given by C = 400 + 0.8(Y - T). The investment function is I = 600 - 70r. Government purchases is 400. Assume a balanced budget. The money demand function is (M/P)d = Y - 180r. The money supply M is 3,000 and the price level P is 3. Find the equilibrium interest rate r and the equilibrium level of income Y. Suppose that government purchases are increased from 400 to What are the new equilibrium interest rate and level of income? Suppose instead that the money supply is increased from 3,000 to 3,500. What are the new equilibrium interest rate and level of income? With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5 What are the new equilibrium interest rate and level of income? Please solve 4
Question 7. Suppose that in a closed economy, government purchases and taxes are both 100. The consumption function is C= 0.75(Y-T+150. The investment function is I = 250 – 25r. The money demand function in the economy is (M/P)d= Y – 100r. The money supply M is 750 and the price level P is 1.5. a. Derive the equations of IS and LM curves. b. Find the equilibrium interest rate r and the equilibrium level of income Y, given that the price is fixed. c. Derive an equation for the aggregate demand curve in this economy.
You are given the following data concerning Freedonia, a leg-endary country:(1) Consumption function: C = 200 + 0.8Y(2) Investment function: I = 100(3) AE C + I(4) AE = Ya. What is the marginal propensity to consume in Freedonia,and what is the marginal propensity to save?b. Graph equations (3) and (4) and solve for equilibrium income.c. Suppose equation (2) is changed to (2 ́) I = 110. What is thenew equilibrium level of income? By how much does the$10 increase in planned investment change equilibriumincome? What is the value of the multiplier? d. Calculate the saving function for Freedonia. Plot this sav-ing function on a graph with equation (2). Explain why theequilibrium income in this graph must be the same as inpart b.
Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function is: I=700-80r. Government purchases and taxes are both 500. For this economy, graph the IS curve for r changing from 0 to 8 b) The money demand function in Hicksonia is (M/P)^d=Y-200r. The money supply M is 3000 and the price level P is 3. For this economy, graph the LM curve for r changing from 0 to 8. c) Find the equilibrium interest rate r and the equilibrium level of income Y. d) Suppose that government purchases are increased from 500 to 700. How does the IS curve shift? What are the new equilibrium interest rate and level of income? e) Suppose instead that the money supply is raised from 3000 to 4500. How does the LM cruve shift? What are the new eqquilibrium interest rate and level of income? f) With the initial level values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What hpapnes? What are the new equilibrium interest rate…
Saving function = S=- 500 + 0.25 Y, I = 400 - 1250 i Ms = 1200, Mt = 0.20 Y, Mp = 0.05 Y and Msp = 500 - 1300 i a) Calculate Y and i equilibrium b) If the government increase its expenditure by 100, what is the rate of national income growth and how many percent the effectiveness of this policy? c)Draw the graph completely.
6. You are given the following data concerning Freedonia, a leg- endary country: (1) Consumption function: C = 200 + 0.8Y (2) Investment function: I = 100 (3) AE = C + I (4) AE = Y a. What is the marginal propensity to consume in Freedonia, and what is the marginal propensity to save? b. Graph equations (3) and (4) and solve for equilibrium income. C. Suppose equation (2) is changed to (2´) I = 110. What is the new equilibrium level of income? By how much does the $10 increase in planned investment change equilibrium income? What is the value of the multiplier?
(a) In order to get out of recession, the government chooses to reduce taxes (T) by 250. Find the new equilibrium level of income and interest rates. (b) If instead (i.e. government taxes are back to the original level of 1000), it chooses to increase the money supply (M) by 250. Find the new equilibrium level of income and interest rates.
You are given data on the following variables in an economy: Item Value Government spending 300 Planned investment 200 Net exports 50 Autonomous taxes 250 Income tax rate 0.1 Marginal propensity to consume 0.5 Consumption (C) is 600 when income (Y) is equal to 1500. a. Solve for autonomous consumption and equilibrium level of output if there is an income tax t=0.2. b. In the economy with an income tax of 10%, what is the budget balance of the government? c. Briefly explain the function of the multiplier as part of Keynesian
Suppose the desired consumption function of Canadaland is given by C^d= 0.5 + 0.7Y - 10r - 0.1G, where Y is income, r is the real interest rate, and G is government purchases. This implies that a. Desired consumption is increasing in the real interest rate b. The marginal propensity to consume is 0.5 c. The marginal propensity to consume is 0.75 d. Desired consumption is increasing in governmental purchases
In a closed economy, the demand for the output consists of consumption (C), Investment (I), and government spending (G), i.e., D=C+I+G. The total income of all people in the economy is equal to GDP. At the same time, consumption depends on disposable income: C=Co+a*(GDP-T) where T is tax, 0