5. Consider the following national-income model (with taxes ignored):Y - C(Y) – 1(i) – Go = 0 (0 < C' < 1; l'< 0)kY +L (i) – M0 = 0 (k = positive constant: L'< 0)(a) is the first equation in the nature of an equilibrium condition?(b) What is the total quantity demanded for money in this model?(c) Analyze the comparative statics of the model when money supply changes(monetary policy} and when government expenditure changes (fiscal policy).

Y – C(Y) – I(Y) – G0 = 0 Y = C + I + G0 Yes the above equation is in equilibrium.

Answered: 5. Consider the following…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 10PA

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