A. Calculate an expression for the IS, MP and AD curves ( r= ?, IS Y= ?, AD Y=?) B. Let AS curve be given by the relation: π = 6 + 1.5 (Y - 25.5) (i.e. the price shock is zero). What are the equilibrium values of inflation, output and the real interest rate(π, Y, r)? C. Suppose government purchases are raised from $3.0 trillion to $3.5 trillion. What are new short-run equilibrium inflation values, output and the real interest rate (π, Y, r}? D. Suppose a financial crisis begins, and ƒ increases ƒ = 3. (Assume government purchases are again as in part (a). What are the new short-run equilibrium values of inflation, output, and the interest rate (π, Y, r}?
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Consider the following economic situations:
C = $4.0 trillion
I = $1.5 trillion
G = $3.0 trillion
T = $3.0 trillion
NX = $1.0 trillion
F = 0
mpc = 0.8
d = 0.35
x = 0.15
r = 1%
λ = 0.5
A. Calculate an expression for the IS, MP and AD curves ( r= ?, IS Y= ?, AD Y=?)
B. Let
C. Suppose government purchases are raised from $3.0 trillion to $3.5 trillion. What are new short-run equilibrium inflation values, output and the real interest rate (π, Y, r}?
D. Suppose a financial crisis begins, and ƒ increases ƒ = 3. (Assume government purchases are again as in part (a). What are the new short-run equilibrium values of inflation, output, and the interest rate (π, Y, r}?
(Please solve all the parts with numerical steps so it could be practiced easily)
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