intermediate Macroeconomics

timer Asked: Jun 12th, 2014

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homework3 (1).pdfAnswer each question showing all work to get the answer. 1 Assume that we can model output demand using: Y = 1 1−(1−s) [G−(1−s)T C0 I(r)] where I(r) = Ω−ωr Additonally assume that the Government has a balanced primary budget: ∆T = ∆G In the short run in the following settings compare the value of ∆Y ∆G. Is it larger than 0? Is it smaller or larger than 1? 1. Suppose the economy has a central bank that fixes the interest rate at rc 2. Suppose there is no speculative demand for money, ie Quantity Theory holds. That is M P V = Y 3. Suppose have standard money demand equation : M P V [r πe]γ = Y 2 Suppose a country has a positive debt to nominal gdp ratio ( b

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