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Use the following values to answer question. Assume a closed economy. C = 200 + .8(Y-T) T = 500 IPlanned = 150 - 10r G
Use the following values to answer question. Assume a closed economy. C = 200 + .8(Y-T) T = 500 IPlanned = 150 - 10r G = 500 (M/P)d = .1*Y - 20*r Assume that the Federal Reserve cuts the interest rate from 5 percent in period 1 to 3 percent in period 2. Use the information above to calculate the following variables. Note that the interest rate should expressed as an integer rather than a decimal. (Hint: use the formula for equilibrium GDP to calculate GDP).
Period 1 Period 2 Change I Y C (M/P)d
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