Consider an economy in which government purchases, taxes, and net exports are all zero, the Consumption function
Question:
Consumption function is
C = 300 + 0.75Y
And investment spending (I) depend on the rate of interest (r) in the following way:
I = 1,000 – 100r
Find the equilibrium GDP if the Fed makes the rate of interest
(a) 2 percent (r = 0.02),
(b) 5 percent, and
(c) 10 percent.
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Related Book For
Macroeconomics Principles And Policy
ISBN: 9780324586213
11th Edition
Authors: William J. Baumol, Alan S. Blinder
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