Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the equation: T=50+ 0.25Y. (Question 4 of 6) Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current economic environment. Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)

Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of real GDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spending behavior is described by the equation: I = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while total imports is described by the equation: IM = 320 +0.1Y. The government's spending is fixed at $840 million and net taxes is described by the equation: T=50+ 0.25Y. (Question 4 of 6) Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the current economic environment. Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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