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e) (3 points) Find the price level needed to clear the money market. Please show all work 1. Consider the following model of the economy:
e) (3 points) Find the price level needed to clear the money market. Please show all work
1. Consider the following model of the economy: Production Function: Y = A . K . N - N MPN = A . K - N where the initial values of A = 6 and K = 10. Labor Supply: N, = 20 + 9w The initial conditions in the goods market are as follows: Cd = 100 + .5(Y -T) -500r Id = 800 - 500r G = 100 T= 100 The initial conditions in the asset market are as follows: L = 78 + 0.5Y- 1000(r + me) Nominal Money supply: M = 1800 Expected inflation is equal to 2% (me = 0.02)Step by Step Solution
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