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Level of consumption and investment

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Reference no: EM131269954

  • Assume the economy is represented by the following equations

Money demand = 6y-120r

Money supply = 5400

Y = C + I + G

C = 180 + .7 (Y-T)

T = 400

I = 100 - 18r + .1 Y

G = 400

A. Solve for equilibrium in the goods market (in terms of income).

B. Solve for equilibrium in the financial market (in terms of interest rates).

C. Solve for the equilibrium interest rate.

D. At this equilibrium what is the level of consumption and investment.

E. What happens if G increase by 10 to become 410? How does this impact Investment?

Reference no: EM131269954

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