Business, 06.05.2020 02:39 GreenHerbz206

Consider an economy described by the following equations: Y=C+I+G C=150+0.6×(Y−T) I=500−50×r G=200 T=150 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at the natural rate of output), GDP would be $1,400. Identify the equation(s) each of the following statements describes. Statement C I G T It is an autonomous amount, independent of other factors. It is a function of disposable income. It depends on the interest rate. The marginal propensity to consume in this economy is . Suppose the central bank's policy is to adjust the money supply to maintain the interest rate at 2%, so r = 2. When the interest rate is 2%, GDP is $ . GDP at an interest rate of 2% is the full-employment level. Assuming no change in monetary policy in government purchases by $ would restore GDP to the full-employment level. (Note: Assume that this change in fiscal policy has no crowding-out effect.) Assuming no change in fiscal policy, in the interest rate by % would restore GDP to the full-employment level.

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Consider an economy described by the following equations: Y=C+I+G C=150+0.6×(Y−T) I=500−50×r G=200 T...

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