Consider an economy described by the following equations Y = C +I + G C = 100 + 0.75(Y – T) I = 500 – 50r G = 125; T = 100 %3D - %3D Where Y is GDP, C is consumption, I is investment, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at its natural rate), GDP would be $2000. a. Explain the meaning of each of these equations. b. What is the marginal propensity to consume (MPC) in this economy? c. Suppose the Central Bank's policy is to adjust the money supply to maintain the interest rate at 4 %, sor = 4. Solve for GDP. How does it compare to the full- employment level? in monetary nolicy, what change in government purchases
Consider an economy described by the following equations Y = C +I + G C = 100 + 0.75(Y – T) I = 500 – 50r G = 125; T = 100 %3D - %3D Where Y is GDP, C is consumption, I is investment, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at its natural rate), GDP would be $2000. a. Explain the meaning of each of these equations. b. What is the marginal propensity to consume (MPC) in this economy? c. Suppose the Central Bank's policy is to adjust the money supply to maintain the interest rate at 4 %, sor = 4. Solve for GDP. How does it compare to the full- employment level? in monetary nolicy, what change in government purchases
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
Section: Chapter Questions
Problem 11PA
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