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Problem - An economy is described by the following equations:
C =15500+0.5(Y-T) - 50000r,
IP = 10000-20000r,
G = 8000,
X = 1300,
M = 1800,
T = T = 8000,
Y* = 50000
Required -
(a) Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate (Given PAE=C+IP+G+NX).
(b) What should the Reserve Bank set the real interest rate to eliminate output gap if any?
If Sergio invests $145,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used.
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