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Use the following assumptions to set up a model of this economy Supply is determined by aggregate demand Consumption depends on income and the opening
Use the following assumptions to set up a model of this economy
- Supply is determined by aggregate demand
- Consumption depends on income and the opening stock of wealth
- Net investment is entirely financed by issuing new bonds
- Firms and banks have no retained profits
- The share of household wealth held as money depends positively on income and negatively on the interest rate on bonds
- The interest rate on bonds is set exogenously
- Investment, net of depreciation, is exogenously set by firms
- Remember the flows-to-stocks links! Capital increases with net investment; household wealth increases with saving
Read the transaction matrix and provide the equation for the assumption. please do not provide me expkanation or chatgpt answer but actually the equations.
Balance sheet Transaction matrix Balance sheet Transaction matrixStep by Step Solution
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