Business, 25.04.2020 01:51 1119diamondlord

The Goods Market: Suppose consumption is a linear function of disposable income: C(Y − T) = a + b(Y − T), where a > 0 and 0 < b < 1. The parameter b is the marginal propensity to consume. The parameter a is a constant, often called autonomous consumption. Suppose also that investment is a linear function of the interest rate: I(r) = c − dr, where c > 0 and d > 0. The parameter d measures the sensitivity of investment to the interest rate. The parameter c is a constant, often called autonomous investment. a. Solve for Y as a function of r, the exogenous variables G and T, and the model’s parameters a, b, c, and d.

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The Goods Market: Suppose consumption is a linear function of disposable income: C(Y − T) = a + b(Y...

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