Question
Consider the following Keynesian economy: C=200+0.6(Y-T)-200r Md =0.5Y-200r I=300-300r Ms =924 T=20+0.2Y Ybar=1000 G=152 NX=150-0.08Y-500r a. What are the general equilibrium values of output, interest
Consider the following Keynesian economy: C=200+0.6(Y-T)-200r Md =0.5Y-200r I=300-300r Ms =924 T=20+0.2Y Ybar=1000 G=152 NX=150-0.08Y-500r
a. What are the general equilibrium values of output, interest rate, consumption, investment, and net exports?
b. Starting at the general equilibrium. Suppose the government increases purchases from 152 to 214. What are the effects of this change on output, the real interest rate, consumption, investment, and net exports in the short run?
c. Starting at the general equilibrium with government purchases at 152. Suppose that net exports increase by 62 NX=212-0.08Y-500r. What are the effects of this change on output, the real interest rate, consumption, investment, and net exports in the short run?
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