Question

Consumption
C=3+0.8Yd
Yd stands for disposable income
Taxes
: T=0.25Y
Government Expenditure
G-245
Investment
: 1=750-SOI
i stands for rate of interest
Real Demand for Money
L=0.4Y-Si
Nominal Money Supply
M =500
Price level
P=2
a) Find the equation of the Goods market
b) Find the equation of the Money market
c) Find the equilibrium level of Income
d the Rate of interest
d) With the help of multiplier, find the change in equilibrium income if the
government expenditure increases by 100.
c) How much of investment would be crowded out as a result of this increase in
government spending of 100,​

Answer 1

Answer:

Consumption

C=3+0.8Yd

Yd stands for disposable income

Taxes

: T=0.25Y

Government Expenditure

G-245

Investment

: 1=750-SOI

i stands for rate of interest

Real Demand for Money

L=0.4Y-Si

Nominal Money Supply

M =500

Price level

P=2

a) Find the equation of the Goods market

b) Find the equation of the Money market

c) Find the equilibrium level of Income

d the Rate of interest

d) With the help of multiplier, find the change in equilibrium income if the

government expenditure increases by 100.

c) How much of investment would be crowded out as a result of this increase in

government spending of 100,