Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G,and desired investment is Id = 100 - 500r.Real money demand is Md/P = Y - 2000i.Other variables are ?e = 0.05,G = 200, 
= 1000,and M = 2100.
(a)Find the equilibrium values of the real interest rate,consumption,investment,and the price level.
(b)Suppose the money supply increases to 2800.Find the equilibrium values of the real interest rate,consumption,investment,and the price level.(Assume that the expected inflation rate is unchanged.)
Definitions:
CCA Class
Pertains to a classification system for tax purposes, grouping assets with similar characteristics for capital cost allowance claims in Canada.
Net Present Value
Net present value is a financial metric that calculates the value of a series of cash flows by discounting them back to their present value using a specific rate.
Fixed Assets
Long-term tangible assets that are used in the operations of a business and not expected to be converted into cash in the short term, like buildings, machinery, and land.
Tax Shield Approach
A method of reducing taxable income through allowable deductions such as depreciation, resulting in lower tax payments.
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