question archive An economy is described by the following equations: C = 2,600 + 0
An economy is described by the following equations: C = 2,600 + 0
Subject:EconomicsPrice: Bought3
An economy is described by the following equations:
C = 2,600 + 0.8(Y-T) - 10,000r
I P = 2,000 - 10,000r
G = 1,800
NX = 0
T = 3,000
The equilibrium real interest rate, expressed as a decimal, is 0.10 (that is, 10%).
a) Find an expression relating planned aggregate expenditure to output.
b) Solve for short-run equilibrium output (you may use a table as in the textbook or simply apply the algebraic method we went through in class).
c) Show your result graphically using the Keynesian Cross diagram.
d) [Harder] Assume that full employment output Y* = 12,000. Show that when the economy is at full employment output, the equilibrium real interest rate also sets national savings equal to planned investment. (Hint -How do we define national savings?).
