Question
C = 200+0.25YD I=150+0.25Y-1000i G=250 T=200 M/P=2Y-8000i i=0.05 Suppose that government spending increases to 400. If the central bank keeps interest rates at 0.05%, find
C = 200+0.25YD
I=150+0.25Y-1000i
G=250
T=200
M/P=2Y-8000i
i=0.05
Suppose that government spending increases to 400. If the central bank keeps interest rates at 0.05%, find the effects of this fiscal expansion on T and C. If the central bank responds by raising the interest rates by enough so that M/P is equal to 1600 what would be the effect on Y, i, and C. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
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Macroeconomics
Authors: Olivier Jean Blanchard
8th Edition
0134897897, 978-0134897899
