Desired consumption is Cd = 2000 + 0.9Y - 100,000r - G,and desired investment is Id = 1000 - 45,000r.Real money demand is Md/P = Y - 6000i.Other variables are ?e = 0.03,G = 500, 
= 1000,and M = 2100.
(a)Find the equilibrium values of the real interest rate,consumption,investment,and the price level.
(b)Suppose government purchases decline to 400.What happens to the variables listed in part (a)?
(c)Suppose government purchases rise to 600.What happens to the variables listed in part (a)?
(d)What feature in this example leads to the result that you don't need to know the amount of taxes collected by the government to find the equilibrium?
Definitions:
Psychic Energy
A concept in psychoanalysis that describes the energy derived from instinctual drives and instincts, influencing and driving human behavior.
Cathexis
An investment of psychic energy in an object or person.
Major Themes
The primary or central subjects, ideas, or concepts around which a piece of work, discussion, or thought is based or revolves.
Death
The permanent cessation of all biological functions that sustain a living organism, marking the end of its life.
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