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Macroeconomics 13th Edition by William Baumol ,Alan Blinder
Edition 13ISBN: 978-1305280601Macroeconomics 13th Edition by William Baumol ,Alan Blinder
Edition 13ISBN: 978-1305280601 Exercise 6
(More difficult) Consider an economy in which government purchases, taxes, and net exports are all zero. The consumption function is
C = 300 + 0.75 Y
and investment spending ( I ) depends on the rate of interest ( r ) in the following way:
I = 1,000 - 100 r
Find the equilibrium GDP if the Fed makes the rate of interest (a) 2 percent ( r = 0.02), (b) 5 percent, and (c) 10 percent.
C = 300 + 0.75 Y
and investment spending ( I ) depends on the rate of interest ( r ) in the following way:
I = 1,000 - 100 r
Find the equilibrium GDP if the Fed makes the rate of interest (a) 2 percent ( r = 0.02), (b) 5 percent, and (c) 10 percent.
Explanation
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a. Equilibrium level of GDP at 0.02 perc...
Macroeconomics 13th Edition by William Baumol ,Alan Blinder
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