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An economy has full-employment output of 1000. Desired consumption and desired investment are C^d=200-500r+0.8(Y-T) I^d=200+500r Government purchases are 196 and taxes are T=20+0.25Y Money demand

An economy has full-employment output of 1000. Desired consumption and desired investment are

C^d=200-500r+0.8(Y-T)

I^d=200+500r

Government purchases are 196 and taxes are

T=20+0.25Y

Money demand is

M^d/P=0.5Y-250(r+^e)

The nominal money supply, M, is 9100 and is not expected to change. What are the general equilibrium values of the real interest rate, price level, consumption, and investment?

PLEASE READ QUESITION CAREFULLY. HAVE HAD TWO ANSWERS WHICH ASSUMED T=20 - 0.25Y

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