ECON MACRO
ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
Question
Chapter 6, Problem 2.5P
To determine

The concept of leakages and injections in the Circular flow.

Concept Introduction:

Circular flow of income: It is the visual model which shows how money flows from one sector to another and create equilibrium.

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  • Please give a detailed solution with an explanation. Please double-check your sources and make sure the answer is 100% correct. Make sure ALL questions are answered too.Blank Answer #1:value of all goods and services produced in the economy in the base yearcost of a given market basket of goods and servicesvalue of all goods and services produced in the economy this yearBlank Answer #2:this year's pricesthe base year's pricesBlank Answer #3:value of all goods and services produced in the economy in the base yearcost of a given market basket of goods and servicesvalue of all goods and services produced in the economy this yearBlank Answer #4:this year's pricesthe base year's pricesBlank Answer #5:produced domesticallybought by consumers
    The following equations describe a small economy. Figures are in millions of dollars; interest rate (i) is in percent per annum. Assume that the price level (P) is fixed. Goods Market C = Co + cYD (Private consumption) YD = Y + TR – T (Disposable income) T = To + tY (Total taxes) I = Io – bi (Private investment) G = Go, TR = TRo (Gov. Expenditure and Transfers, respectively) Y = C + I + G (Goods mkt. equilibrium condition) Money Market L = kY- hi (Demand for real balances) Ms = Mo/P (Real money supply) L = Ms (Money mkt. equilibrium condition) Endogenous Variables: C, YD T, I, Y, L, Ms and i Exogenous Variables: Co = 300, To = 80, Io = 450, Go = 300, TRo = 100, Mo = 350, P =1 Parameters: c = 0.85, t = 0.15, b = 50, k = 0.25 and h = 62.5 Policy…
    An economy is described by the following equations:Expenditure Sector: Money Sector:S = - 200 + (1/5)YD Ms = 400TA = (1/8)Y - 40 Md = (1/4)Y + 100 - 5iTR = 60I = 300 – 10iG = 70 NX = 150 - (1/5)YHere S is saving; TA is taxes; TR is transfers; I is investment; G is government spending; NX is net exports; Ms is money supply; and Md is money demand.a)  Find the IS and LM equations for this economy. Draw those equations in an IS-LM framework.b)  Find the equilibrium level of output and interest rates. Calculate also the equilibrium values of investment (I), net exports (NX), and money demand (md)
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