14 Aug 1. Now consider the following model and answer related questions. Y = C + I + G + X -…
1. Now consider the following model and answer related questions.
Y = C + I + G + X – IM
C = 49 + 0.9DI
I = 300 – 2000r
G = 800
T = 10 + 1/3(Y)
X – IM = 60
a. If fed decides to set the interest rate at r = 0.05, how much will be the equilibrium GDP?
b. At that rate how much is budget deficit or surplus?
c. By how much GDP will change if government cuts tax rate from 1/3 to
0.20 and at the same time the Fed raises the interest rate from 0.05 to 0.06?
d. Now suppose net exports drops by 20. In order to offset its contractionary impact
on GDP, Fed decides to lower the rate of interest from 0.05 to 0.04 (just like
during Asian crisis). How much is your prediction for a change in GDP?
2. Consider the following model and again answer related questions.
Y = C + I + G + X – IM
C = 300 + 0.75DI where DI = Y – T
I = 600 – 1000r
G = 300
X-IM = 100
T = 0
a. How much is equilibrium level of income or output if Fed decides to set the rate
of interest at 10 percent (r=0.10).
b. In an effort to cool down the economy, the Fed raises the rate of interest to r
=0.15. By how much will Y change?
c. To coordinate the fiscal and monetary policies, assume government decides to
balance the budget by raising taxes by 300. At the same time Fed decides to
counter the contractionary effect of the tax hike and lowers the rate of interest to
r = 0.05. Can you predict the change in Y?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Wridemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Place Order” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.