ZuoTi.Pro
Question

c= 100+ 0.8 (y - t) i = 500 - 50r g= 400 t= 400 M = P(0.2y + 500 – 25r) Price level is fixed at 1. The money supply is 520 (5
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Money demand = P (0.2y + 500 - 25r)

P = 1

y = c + i + g ................(1)

c = 100 + 0.8(y - t)

i = 500 - 50r

g = 400

t = 400

Put values of c, i , g , t in (1)

y = 100 + 0.8(y - t) + 500 - 50r + 400

y = 100 + 0.8(y - 400) + 900 - 50r

y = 1,000 + 0.8y - 320 - 50r

y = 680 + 0.8y - 50r

0.2y = 680 - 50r

y = 3,400 - 250r

At equilibrium, money demand equals money supply

P (0.2y + 500 - 25r) = 520

0.2 (3,400 - 250r) + 500 - 25r = 520

680 - 50r + 500 - 25r = 520

660 = 75r

r = 8.8

At r = 8.8, y = 3,400 - 250 * 8.8 = 1,200

0 0
Add a comment
Know the answer?
Add Answer to:
c= 100+ 0.8 (y - t) i = 500 - 50r g= 400 t= 400 M...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. Suppose an economy is represented by the following equations: C=500+.75(Y-T) I=1000 -50r (M/P)d=Y-200r G=1000 T=1000...

    1. Suppose an economy is represented by the following equations: C=500+.75(Y-T) I=1000 -50r (M/P)d=Y-200r G=1000 T=1000 M=6000 P=2 Use these equations to derive both the IS and LM curves.   Suppose that a newly elected president cuts taxes by 20%. Assuming that the money supply is held constant, what is the equilibrium interest rate in this economy? Round your answer to the nearest tenth. Do not use a percent sign when entering your answer. Your answer should not be given as...

  • Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I =...

    Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I = 120-5 M/P = Y-25r G = 200 T = 200 M = 3000 P = 3 a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. IS: Y= LM: Y= IS: Y= LM:...

  • Suppose that the money demand function is (M/P)d = 800 - 50r, where r is interest...

    Suppose that the money demand function is (M/P)d = 800 - 50r, where r is interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph the supply and demand for real money balances. b. What is equilibrium interest rate? c. What happens to the equilibrium interest rate if the supply of money is reduced from 2000 to 15000? d. If the central bank wants the interest rate to be...

  • Assume that GDP (Y) IS 5,000. Consumption (C) is given by the equation C-1,200+0.5(Y-T)-50r, where r...

    Assume that GDP (Y) IS 5,000. Consumption (C) is given by the equation C-1,200+0.5(Y-T)-50r, where r is the real interest rate in percentage. Investment (I) is given by the equation I=1,500-50r. Taxes (T) are 1,200 and government spending (G) is 1,500. 1) What are the equilibrium values of C, I, and r? 2) What are the values of private saving, public saving, and national saving?

  • An economy is initially described by the following equations: C = 60 + 0.8(Y-T) I =...

    An economy is initially described by the following equations: C = 60 + 0.8(Y-T) I = 120-5 M/P = Y-25 G = 200 T = 200 M = 3000 P = 3 d. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier? new equilibrium : 10 new money supply: 2400 tax multiplier: -4 Incorrect...

  • The following equations describe an economy. Y=C+I+G C=50+0.75*(Y-T) I=150-10r (M/P)d=Y-50r G=250 T=200 M=3,000 P=4 Identify each...

    The following equations describe an economy. Y=C+I+G C=50+0.75*(Y-T) I=150-10r (M/P)d=Y-50r G=250 T=200 M=3,000 P=4 Identify each of the variables, and briefly explain their meaning. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph. From the above list, sue the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part b). What are the equilibrium...

  • 1. In an economy which has a national income identity as the following; Y= C+ I + G + NX where C ...

    I need help with this. 1. In an economy which has a national income identity as the following; Y= C+ I + G + NX where C = 400 + 0.6 Yd,; 1 = 1000-4600 r, G-1240 T-200 +0.25 Y; NX-400-0.05Y-8 00 e ( ofcourse, Yd=Y-T) Where e- foreign currency/ domestic currency, and initially set at e 1.25+2.5R The money demand function is Md- 0.75 Y-7500 r, and money supply is set by the Central Bank at 450. All calculation...

  • Consider the following model of a closed macroeconomy. The Labour Market Y = 60N - N2/2...

    Consider the following model of a closed macroeconomy. The Labour Market Y = 60N - N2/2 N = 60-W/P (1) (2) Production function Labour demand N = (0.5)W/P (3) Labour supply Labour market equilibrium N. = N, EN (4) The Goods Market C = 140+0.75Y) I = 20+0.2Y - 200i G=150 (5) Consumption function (6) Investment function (7) Government expenditure (8) Disposable income (9) Tax function (10) Goods market equilibrium Y = Y-T T =Y 3 Y=C+I+G The Money Market...

  • Please give a detailed solution, thank you! 5. Given C 5000.75 (Y T) I = 2,000 -50r G 1,000 T 1,000 - 10Y - 2000r Ms 50,...

    Please give a detailed solution, thank you! 5. Given C 5000.75 (Y T) I = 2,000 -50r G 1,000 T 1,000 - 10Y - 2000r Ms 50,000 P a. Derive the IS curve and the LM curve, and find the equilibrium interest rate and output b. Government spending increases by 500. If the central bank does not react at all to this change, what is the new equilibrium output and interest rate? If instead the central bank wants to keep...

  • Assume that the following equations summarize the structure of an economy. Answer the following questions:            ...

    Assume that the following equations summarize the structure of an economy. Answer the following questions:             (a) What is the equation of the IS curve?             (b) What is the equation of the LM curve?             (c) What is the equilibrium real output?             (d) What is the equilibrium interest rate?             (e) What is the level of saving at equilibrium? What is the level of planned investment at equilibrium? Determine whether leakages equal injections at equilibrium. Assume that r...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT