Business, 16.03.2020 17:49 talanna394

Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G, and desired investment is Id = 100 - 500r. Real money demand is Md/P = Y - 2000i. Other variables are πe = 0.05, G = 200, Y (Full output level) = 1000, and M = 2100. (a) Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (b) Suppose the money supply increases to 2800. Find the equilibrium values of the real interest rate, consumption, investment, and the price level. (Assume that the expected inflation rate is unchanged.)

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Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G, and desired investment is Id = 100 - 500r. Rea...

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