Intermediate macro economics.

Added on - 16 Sep 2019

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Intermediate macro economicsSolution (1)C = 160 + 0.6YdI = 150G = 150T = 100Y= AD= C+I+G=160 + 0.6Yd+150+150= 160+ 0.6 (Y-T) +150 + 150=160+ 0.6(Y-100) +150+150=160+ 0.6Y-60+300Y-0.6Y=4000.4Y=400=400/0.4=1000Aggregate demandAD= C+I+G= 160 + 0.6Yd+150+150=160+ 0.6 (Y-T) +150 + 150=160+0.6*900+300=160+540+300=1000Thus, the aggregate demand is 1000ii)Disposable incomeY=Y-T=1000-100=900Thus, disposable income is 900
iii)ConsumptionC=160 + 0.6Yd=160+0.6*900=160+540=700Thus, consumption is 700iv) Marginal propensity to consume and autonomous consumptionC=160 + 0.6YdHere, Marginal propensity to consume is 0.6 and autonomous consumption is 160Solution (2)Consumption function: C= 100 + 0.75YdInvestment function: I = 250 – 4iGovernment spending: G= 150Tax function: T= 40 + 0.20YTransfer payment: TR= 40Transaction/precaution of money: Mt=0.25YSpeculative demand for money:Msp= -20iNominal supply of money:Ms= 1000Price level: P = 51)For IS curve equation
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