Consider the following features of the hypothetical Economy. C = 300 + 0.75(Y-T)I = 600 - 6000iMs = 600 billionMtp = 300 - 9000iT = 240 + 0.2YG = 300…
BBS Macroeconomics for Business · 2079 · Solved Question with Answer
Consider the following features of the hypothetical Economy.
C = 300 + 0.75(Y-T)I = 600 - 6000iMs = 600 billionMtp = 300 - 9000iT = 240 + 0.2YG = 300 billionMt = 0.5 Ya. Calculate the equilibrium income and rate of interest.b. It is realized that the economy is trapped in an economic depression. In order to remove recession, the government has implemented an expansionary fiscal policy and increased its expenditure by 300 billion. The central bank has also supported government and increased the money supply by 300 billion. What will be the simultaneous effect on equilibrium national income and rate of interest?c. State the characteristics of economic depression. Are these policies effective to remove depression? Give your critical comment.