5. Consider the following national-income model (with taxes ignored): Y - C(Y) – 1(i) – Go = 0 (0 < C' < 1; l'< 0) kY +L (i) – M0 = 0 (k = positive constant: L'< 0) (a) is the first equation in the nature of an equilibrium condition? (b) What is the total quantity demanded for money in this model? (c) Analyze the comparative statics of the model when money supply changes (monetary policy} and when government expenditure changes (fiscal policy).

5. Consider the following national-income model (with taxes ignored): Y - C(Y) – 1(i) – Go = 0 (0 < C' < 1; l'< 0) kY +L (i) – M0 = 0 (k = positive constant: L'< 0) (a) is the first equation in the nature of an equilibrium condition? (b) What is the total quantity demanded for money in this model? (c) Analyze the comparative statics of the model when money supply changes (monetary policy} and when government expenditure changes (fiscal policy).

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 20CTQ: Suppose the economy is operating at potential GDP when It experiences an increase in export demand....

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