Reference no: EM132482138
(Differential Equations: Three exogenous variable cases)Consider the macroeco- nomic model
(1)Y =C+I+G,(2)C=F(Y,T,r),(3)I=f(Y,r)
where F and f are continuously differentiable functions with FY′ > 0, FT′ <0, Fr′ <0,fY′ >0, fr′ <0 and FY′ +fY′ <1.
i) Differentiate the system and express dY,dC and dI in terms of dT, dG and dr.
ii) What happens to Y, C and I when only G decreases? What happens to Y, C and I when only T decreases?
iii) Suppose that the government decreases G and T by the same proportion. What is the effect on Y ?
If you answer I would be appreciated
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