(1)The following macroeconomic model describes the economy of Sunderland. 1. Y C + I + G + NX Income Identity Consumption function Investment function 2. C 220 + 0.63 Y 3. 1= 1000-2000R 4. G = Go Government Expenditure Net export function Money market equilibrium 5. NX = 525 -0.10Y-500R 6. M (0.1583Y-1000R)P (a)ls it a fair characterization to refer to equation #2 as a "simple" consumption function? Explain. (b)Derive the expression for equilibrium real output, Y, for this economy. Note: In your final expression for Y, restrict coefficient values to three decimal points. (c) Suppose government spending is 1200, money supply by the Central Bank is 900 and the price level is 1, find the value of GDP (Y) and equilibrium interest rate (R) for Sunderland.

(1)The following macroeconomic model describes the economy of Sunderland. 1. Y C + I + G + NX Income Identity Consumption function Investment function 2. C 220 + 0.63 Y 3. 1= 1000-2000R 4. G = Go Government Expenditure Net export function Money market equilibrium 5. NX = 525 -0.10Y-500R 6. M (0.1583Y-1000R)P (a)ls it a fair characterization to refer to equation #2 as a "simple" consumption function? Explain. (b)Derive the expression for equilibrium real output, Y, for this economy. Note: In your final expression for Y, restrict coefficient values to three decimal points. (c) Suppose government spending is 1200, money supply by the Central Bank is 900 and the price level is 1, find the value of GDP (Y) and equilibrium interest rate (R) for Sunderland.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Production And Growth

Section: Chapter Questions

Problem 5CQQ

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