⦁ Given the following macroeconomic equations that describe a certain economy:
- Consumption function
- Investment function
- Government purchases
- Tax rate
- Real money demand
- Real money supply
Required
⦁ Calculate the IS and LM equations.
⦁ Y and r pair at which the two markets are both in equilibrium.
⦁ Explain three factors that affect the growth of any country.
⦁ Derive the tax multiplier and interpret
⦁ Using a four quadrant diagram, discuss the effect of the following on equilibrium rate (r) and income (Y).
⦁ An increase in money supply
⦁ An increase in price level
B What accounts for differences in wealth between countries?
⦁ Explain the factors that will determine our standards of living in the future.
⦁ Account for similarities and differences between Neoclassical growth and the endogenous growth models.
Explain the effects of fiscal policy on interest rate (r) and income (Y).
Answers
Answer:
What Is Ricardian Equivalence?
Ricardian equivalence is an economic theory that says that financing government spending out of current taxes or future taxes (and current deficits) will have equivalent effects on the overall economy.
This means that attempts to stimulate an economy by increasing debt-financed government spending will not be effective because investors and consumers understand that the debt will eventually have to be paid for in the form of future taxes. The theory argues that people will save based on their expectation of increased future taxes to be levied in order to pay off the debt, and that this will offset the increase in aggregate demand from the increased government spending. This also implies that Keynesian fiscal policy will generally be ineffective at boosting economic output and growth.
Explanation:
Please mark as BRAINEST