Answered: 2. At the equilibrium in part 1, what…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the following short-run, closed economy model of the economy.

Goods Market

C = 50 + 0.5(Y – T)

I = 150 – 10r ; NX = -200

G = 150 ; T = 100

Money Market

M = 20,000

P = 100

L(Y, r) = Y – 50r

1. Find the equilibrium values of r and y. *** This has been answered***

Goods Market = 600 - 20r

Money Market = 200 + 50r

equilibrium value of r = 5.71; Y = 485.8

2. At the equilibrium in part 1, what is the value of national savings (S = Y – C – G)? Investment? Show the results using a graph for the market of loanable funds. Is that market in equilibrium? Explain.

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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