-The Following Equations Describe a Keynesian Model of the Economy

question 72

Essay

-The following equations describe a Keynesian model of the economy.
(a)Find the full-employment equilibrium values of the real interest rate,consumption,investment,and the price level.
(b)Suppose government purchases decline to 175,with no change in taxes.What happens to the real interest rate,output,consumption,and investment in the short run (in which the price level is fixed)? What happens in the long run to the real interest rate,consumption,investment,and the price level?
(c)Suppose instead that government purchases rise to 225,with no change in taxes,starting from the equilibrium in part (a).What happens to the real interest rate,output,consumption,and investment in the short run (in which the price level is fixed)? What happens in the long run to the real interest rate,consumption,investment,and the price level?

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Definitions:

Concussions

A type of traumatic brain injury caused by a bump, blow, or jolt to the head, leading to temporary loss of normal brain function.

Skill Memories

Long-term memories related to the performance of particular types of action, often acquired through repetition and practice.

Cerebellum

Hindbrain region that coordinates voluntary movements.

Motor Activity

Physical actions and movements generated by the muscles and nervous system of an organism.