What will be the effects on the positions of the mp curve

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Consider an economy characterized by the following: C = $3.5 trillion I = $1.8 trillion G = $2 trillion T = $2 trillion NX = -$1 trillion mpc = .75 d = 10 x=5 λ=1 r = .01 f =.01 A. Derive mathematical expressions (based on the given parameter values) for the MP curve and the AD curve. B. Assuming that π = .02 , solve for the equilibrium levels of consumption, investment demand, and net exports. C. Suppose the Fed increases r to .02. Calculate the effects on the real interest rate, output, and consumption. 9. Supposed the economy is initially as described in question 8. Then, the federal government reduces its autonomous spending G by $200 billion at the same time that the Fed reduces its target for the autonomous component of the real interest rate r to zero. What will be the effects on the positions of the MP curve, the IS curve, and the AD curve? Explain and show.

Reference no: EM131161188

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