The following set of equations describe an economy:
C = 14,000 + 0.9(Y – T) – 45,000r I...
Business, 16.04.2020 22:50 korbenbrown7554
The following set of equations describe an economy:
C = 14,000 + 0.9(Y – T) – 45,000r I p = 7,000 – 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 104,000
a. Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate.
b. At what value should the Fed set the real interest rate to eliminate any output gap?
(Hint: Set output Y equal to the value of potential output given above in the equation you found in part a. Then solve for the real interest rate that also sets planned aggregate expenditure equal to potential output.)
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