Question ONEa) Consider an economy described by the following:Y = C+I+GY= 5000 ; G= 1000 ; T= 1000 ; C= 250 + 0.75%3D(Y-T) ; and I = 1000-50ri. Compute the national savings and equilibriuminterest rate:ii. Suppose that G rises to 1,250, compute nationalsavings and the new interest rate:b) Briefly explain the following:i. Monetary transmission mechanismii. Supply of real money balancesiii. Natural rate of unemploymentiv. Classical aggregate supply curvev. The aggregate demand curvevi. Potential GDPvii. Crowding out

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i. Compute the national savings and equilibrium interest rate: ii. Suppose that G rises to 1,250, compute national savings and the new interest rate:

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

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