6. (Appendix 11 .C) Consider the following economy. Desired consumption Cd == 325 + 0.5(Y - T) Desired investment Government purchases Taxes Real money demand Money supply Full-employment output - 500r. I d == 200 - 500r. G == 150. T == 150. L == 0.5Y - 1000r. M == 6000. - y == 1000.

a. Calculate the full-employment values of the real interest rate, the price level, consumption, and investment.

b. What are the values of aJs, f3Js, aLM! f3LM1 and er for this economy? (You'll have to refer back to Appendix 9.B for definitions of these coefficients.)

c. Suppose that the price level is fixed at Psr == 15. What are the short-run equilibrium values of output and the real interest rate?

d. With the price level still fixed at Psr == 15, suppose that government purchases increase from G == 150 to G == 250. What are the new values of a15 and the short-run equilibrium level of output?

e. Use Eq. (11 .C.5) to compute the government purchases multiplier. Use your answer to compute short-run change in Y resulting from an increase in government p urchases from G == 150 to G == 250. How does your answer here compare to your answer in Part (d)?