Question
This is the required question and it is totally complete kindly answer this all the information in given Desired consumption is Cd=2000+0.9Y - 100,000r -
This is the required question and it is totally complete kindly answer this all the information in given
Desired consumption is Cd=2000+0.9Y - 100,000r - G, and
desired investment is Id=1000 - 45,000r.
Real money demand is Md/P =Y - 6000i.
Other variables are inflation=0.03, G =500, Y=1000, and
M =2100.
(a) Find the equilibrium values of the real interest rate, consumption, investment, and the price level.
(b) Suppose government purchases decline to 400. What happens to the variables listed in part (a)?
(c) Suppose government purchases rise to 600. What happens to the variables listed in part (a)?
(d) What feature in this example leads to the result that you don't need to know the amount of taxes
collected by the government to find the equilibrium?
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