Reference no: EM13833548
Consider the following structure of an economy:
Consumption: C = 25 + 0.75(Y-T)
Investment: I = 5 + 0.25i
Government Spending: G = 10
Taxes: T = 20
Money Supply: MS = 80
Money Demand: MD = (Y-i)P
Where i is interest rate in percentages, C is consumption, Y is nominal GDP, I is investment, G is government expenditures, T is taxes, MS is money supply and MD is money demand.
a) Assuming that the price level is P = 1, find the equilibrium real output, interest rate, consumption, and investment. Organize your results in the following table. (Hint: You should solve both the goods market and the money market equilibrium.)
b) Now assume that the government increases spending so that G = 15. Answer part a). for the new condition and illustrate the effects of the fiscal expansion with the diagrams of the goods market and the money market.
c) What would be the change in the equilibrium output in part b). in the simple Keynesian model without the money market? (Hint: Think about the simple multiplier) Compare this with the change in output in part b). and explain why there is a difference.
|
Example of speculative risk-noninsurance risk transfer
: One of the elements of risk is uncertainty. Which one of the following best describes the type of uncertainty that risk involves? Risk can be classified as pure or speculative. Which one of the following is the best example of a speculative risk? Whi..
|
|
Examine the effects of supply and demand of milk
: Examine the effects of supply and demand of milk. How do markets operate to bring this product into existence? Think about how these different markets work together to create a new product. How does that relationship affect supply and demand for the ..
|
|
Discuss issue from the perspective of the payer and recipien
: 1. You are the tax consultant for a spouse in a divorce proceeding. Please discuss and compare alimony versus child support from a tax perspective. Please discuss this issue from the perspective of the payer and from the recipient. A tax client has t..
|
|
Find the equilibrium real output-interest rate-consumption
: Assuming that the price level is P = 1, find the equilibrium real output, interest rate, consumption, and investment. Organize your results in the following table. (Hint: You should solve both the goods market and the money market equilibrium.) Now a..
|
|
Stand for the number grade in math and in economics
: Suppose that John takes this semester only two courses, math and economics. He allocates his studying time between the two. Let M and E stand for the number grade in math and in economics, respectively. Provide a brief economic interpretation of the ..
|
|
Goods market and the money market equilibrium
: Assuming that the price level is P = 1, find the equilibrium real output, interest rate, consumption, and investment. Organize your results in the following table. (Hint: You should solve both the goods market and the money market equilibrium.)
|
|
Plot production possibilities frontier
: Suppose we have the following information about the productivity of two industries in USA and Mexico. The unit labor requirements are given in the following table. Plot production possibilities frontier (PPF) for each country assuming that each count..
|
|
Calculate the tax savings in each year
: Calculate the NPV of the project. Calculate the tax savings in each year, if the rate of tax on chargeable income (taxable profits) is 25%. Calculate the NPV of the project: (a) If tax is payable in the same year as profit is earned. (b) If tax is pa..
|