The following set of equations describe an economy: C = 14,400 + 0.5 (Y − T) − 40,000r Ip = 8,000 − 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)

The following set of equations describe an economy: C = 14,400 + 0.5 (Y − T) − 40,000r Ip = 8,000 − 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Classical Macroeconomics And The Self Regulating Economy

Section: Chapter Questions

Problem 14QP

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