Given the following information: Consumption: 100 + 0.8 Yd Investment: 150 – 16i Govt. expenditure: 100 Taxes: 0.25Y DD for money: 0.2Y – 2i Nominal money supply: 300 Price level: 2 a) Determine equilibrium level of income and rate of interest b) If govt expenditure increases by 50, what will be the new equilibrium of income and the rate of interest? c) Is there any crowding out? If yes, what is the extent of crowding out of income
Given the following information: Consumption: 100 + 0.8 Yd Investment: 150 – 16i Govt. expenditure: 100 Taxes: 0.25Y DD for money: 0.2Y – 2i Nominal money supply: 300 Price level: 2 a) Determine equilibrium level of income and rate of interest b) If govt expenditure increases by 50, what will be the new equilibrium of income and the rate of interest? c) Is there any crowding out? If yes, what is the extent of crowding out of income
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 6TY
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Given the following information:
Consumption: 100 + 0.8 Yd
Investment: 150 – 16i
Govt. expenditure: 100
Taxes: 0.25Y
DD for money: 0.2Y – 2i
Nominal money supply: 300
Price level: 2
a) Determine equilibrium level of income and rate of interest
b) If govt expenditure increases by 50, what will be the new equilibrium of income and the
rate of interest?
c) Is there any crowding out? If yes, what is the extent of crowding out of income?
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