Consider the following Keynesian economy:

Desired consumption cd = 200 + 0.6(Y - T) - 200r.

Desired investment Id = 300 - 300r.

Taxes T = 20 + 0.2Y.

Government purchases G = 152.

Net exports NX = 150 - 0.08Y - 500r.

Money demand L = 0.5Y - 200r.

Money supply M = 924.

Fullemployment

output Y = 1000.

a. What are the general equilibrium (that is, long-run)

values of output, the real interest rate, consumption,

investment, net exports, and the price level?

b. Starting from full employment, government

purchases are increased by 62, to 214. What are

the effects of this change on output, the real

interest rate, consumption, investment, net exports,

and the price level in the short run? In the

long run?

c. With government purchases at their initial value of

152, net exports increase by 62 at any income and

real interest rate so that NX = 212 - 0.08Y - 500r.

What are the effects of this change on output, the

real interest rate, consumption, investment, net

exports, and the price level in the short run? In

the long run? Compare your answer to that for

Part (b).