3. Desired consumption is Cd = 100 + 0.8Y 500r 0.5G, and desired investment is...
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3. Desired consumption is Cd = 100 + 0.8Y – 500r −
0.5G, and desired investment is I d = 100 - 500r.
Real money demand is Md>P = Y - 2000i. Other variables are pe = 0.05, G = 200, Y = 1000, and M = 2100.
a. Find the equilibrium values of the real interest rate, consumption, investment, and the price level.
b. Suppose the money supply increases to 2800.
Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (Assume that the expected inflation rate is unchanged.)
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Related Book For 
Macroeconomics Global Edition
ISBN: 978-1292318615
10th Edition
Authors: Andrew Abel ,Ben Bernanke ,Dean Croushore
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