Essay
Consider a Keynesian consumption function with desired consumption equal to 0.9 Y,where Y is income.Government purchases are $1000,net exports are zero,and desired investment varies with real interest rate according to the following schedule:
Assume the interest rate adjusts so that the economy gets to equilibrium.Equilibrium output at full employment is $50,000.Find the values of consumption,investment,and the real interest rate at full-employment equilibrium.
Correct Answer:

Verified
Let X = Iᵈ ⁺ ᴳ.Since Y = Cᵈ + Iᵈ ⁺ ᴳ,ʸ ⁼...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q85: An economy has full-employment output of 5000.Government
Q86: The "q theory of investment," or "Tobin's
Q87: A decrease in the real interest rate
Q88: Suppose the interest rate is 2 percent,the
Q89: A temporary supply shock,such as a drought,would<br>A)increase
Q90: Which of the factors listed below might
Q92: If you lend money to the government
Q93: Explain why the Ricardian equivalence proposition is
Q94: Which of the following machines has the
Q95: Suppose the real interest rate has declined.We