Question I An economy is characterized as follows: T--200.2Y C- 150 +.75Yd 300 +
ID: 1161838 • Letter: Q
Question
Question I An economy is characterized as follows: T--200.2Y C- 150 +.75Yd 300 +.6)Y 1-300 +.1Y-3000 i G-300 Goods market equilibrium (IS) is given by Y- (1/3)(900-3000 i) 3000 10000 i Money market equilibrium (LM) is given by i policy interest rate. i.1 where i is the Central Bank's nominal What are the values of output, disposable income, consumption, investment spending. and national saving, at general equilibrium for this economy? Show your calculations (3 points each) a) iv. I- S-Sprivate + Spublic =Explanation / Answer
ans
i.) Y = 3000 - 10000 i = 3000 - 10000 (0.1) = 2000
ii.) Yd = Y- T +TR here TR = 0
= 2000 - (-200+ .2 Y)
= 2000+200 -0.2 (2000) = 1800
iii.) C= 300 + 0.6 Y = 300 +0.6(2000) = 1500
iv.) I = 300 +0.1 Y- 3000 i = 300+0.1(2000) -3000(0.1) =200
v.) in a closed economy Savings = Investment , hence, savings= 200