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An economy is described by the following equations: C-1600 +0.61Y - 7) -2,000 P_2,500 - 10001 G=2.000 NX-50 T=2,000 The Bank of Lotusland the central
An economy is described by the following equations: C-1600 +0.61Y - 7) -2,000 P_2,500 - 10001 G=2.000 NX-50 T=2,000 The Bank of Lotusland the central bank, has announced that it will set the real interest rate according to the policy reaction function found in the table below. Inflation rate Real Interest rate, 0.00 0.000 0.010.045 0.02 0.050 0.03 0.055 0.00 0.060 a. For each of the rates of inflation given below, find autonomous expenditure and short-run equilibrium output in Lotusland Instructions: Enter your responses rounded to whole numbers Autonomous expenditure Equilibrium output Inflation rate i 0.00 0.01 0.02 . 0.44 Real Interest rates 0.940 0.045 0.050 0.055 0.060 Using the data above, graph the AD curve Aggregate Demand 4.5 Tools 4.0 3.5 AD 3.0 2.5 Inflation Rate 2.0 1.5 1.0 0.5 0.0 11,925 11.975 12.025 12,075 12.125 12,175 12.225 Output b Suppose that the central bank decides to lower the real interest rate by 0.5 percentage point at each value of inflation For the rates of inflation given, find autonomous expenditure and short-run equilibrium output in Lotusland after the increase in government purchases Instructions: Enter your responses rounded to whole numbers Inflation rate a Autonomous expenditure Equilibrium output 0.00 0.01 0.02 0.03 0.04 Real Interest rate, 0.035 0.040 0.045 0,00 0.055 by at each level of The decrease in the real interest rate at each level of inflation shifts the AD curve (Click to select inflation
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