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4. An economy is described by the following equations: C =15500+0.5(Y-T) - 50000r, IP=10000-20000r, G=8000, X= 1300, M=1800, - T=T=8000, Y*=50000 (a) Find a numerical

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4. An economy is described by the following equations: C =15500+0.5(Y-T) - 50000r, IP=10000-20000r, G=8000, X= 1300, M=1800, - T=T=8000, Y*=50000 (a) Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate (Given PAE=C+P'+G+NX) (7 marks) (b) What should the Reserve Bank set the real interest rate to eliminate output gap if any? (8 marks)

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