(Solution) An economy is described by the following equations: Desired consumption Cd = 130 + 0. > Snapessays.com


(Solution) An economy is described by the following equations: Desired consumption Cd = 130 + 0.


An economy is described by the following equations:

 

Desired consumption Cd

 

= 130 + 0.5(Y ? T) ? 500r

 

Desired investment I

 

d

 

= 100 ? 500r

 

Government purchases G = 100

 

Taxes T = 100

 

Real money demand L = 0.5Y ? 1000r

 

Money supply M = 1320

 

Full-employment output ? = 500.

 

Assume that expected inflation is zero so that money demand depends directly on the real

 

interest rate.

 


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This question was answered on: Sep 21, 2023

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