Desired Consumption Is Cd = 2000 + 0

question 14

Essay

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?

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Definitions:

Interval

A range of values or a segment of a number line, often specified by its endpoints.

Manufacturing Process

A manufacturing process is the series of steps through which raw materials are transformed into a final product, involving various techniques and machinery.

Time Study

A work measurement technique for recording the times of performing a certain specific task to establish the standard time for an activity.

Inequality

A mathematical statement that indicates a non-equal relationship between two expressions.