Short run Aggregate Supply: Long run Aggregate Supply: Aggregate Demand: Investment Spending: Consumption Spending: Government Spending: Net Exports (eX– iM): SRAS = Y = 5000n + 14,400 LRAS = Y* = 25,000 %3D %3D AD = Y= C+I+G+NX I = 4000 – 250r C = 1000+ 0.75(Y – T) %3D %3D G 2000 NX 500 %3D Taxes – Transfers: T = 2400 Monetary Policy: Money Demand: Money Market equilibrium: Fisher equation: where i is the nominal interest rate (i.e. when the interest rate is 7%, it means i = 7) r = 2 n MP = 20,000 – 2000i M$ = MD i = r+n e. Find the short run equilibrium level of real GDP (Y), and inflation rate (7), in the short run. What is the output gap in the economy? Is it an expansionary or recessionary gap?

Short run Aggregate Supply: Long run Aggregate Supply: Aggregate Demand: Investment Spending: Consumption Spending: Government Spending: Net Exports (eX– iM): SRAS = Y = 5000n + 14,400 LRAS = Y* = 25,000 %3D %3D AD = Y= C+I+G+NX I = 4000 – 250r C = 1000+ 0.75(Y – T) %3D %3D G 2000 NX 500 %3D Taxes – Transfers: T = 2400 Monetary Policy: Money Demand: Money Market equilibrium: Fisher equation: where i is the nominal interest rate (i.e. when the interest rate is 7%, it means i = 7) r = 2 n MP = 20,000 – 2000i M$ = MD i = r+n e. Find the short run equilibrium level of real GDP (Y), and inflation rate (7), in the short run. What is the output gap in the economy? Is it an expansionary or recessionary gap?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1QR

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