The following set of equations describe an economy: C = 14,400 + 0.5 (Y − T) − 40,000r Ip = 8,000 − 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)
The following set of equations describe an economy: C = 14,400 + 0.5 (Y − T) − 40,000r Ip = 8,000 − 20,000r G = 7,800 NX = 1,800 T = 8,000 Y* = 40,000 Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 1CQ
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The following set of equations describe an economy:
C = 14,400 + 0.5 (Y − T) − 40,000r
Ip = 8,000 − 20,000r
G = 7,800
NX = 1,800
T = 8,000
Y* = 40,000
Suppose that the real interest rate (r) is 10%. Is the economy in long run equilibrium? If not, what real interest rate should central bank set to restore the economy back to the long run equilibrium? And what methods can central bank use to adjust the interest rate? (Round your answer to 2 decimal places)
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