Consider an economy called Xanadu for which desired aggregate consumption depends on income, Y , and the real interest rate, r', according to Cª = 100 + 0.7Y – 200r. Xanadu's GDP is Y = 1000and government spending on goods and services is G = 180. xanadu's desired future capital stock is given by %3D K* = 140 – 100uc %3D where UC denotes the user-cost of capital. The price of capital is PK = 2, the physical depreciation rate isd = 0. land the existing capital stock is Ko = 50. evolves according to apital stock between any period t and the following period t+1 K+1 = I, + (1 – d)K, wherel is the level of investment. Assume throughout that net factor payments from abroad (NFP) is equal to zero.

Consider an economy called Xanadu for which desired aggregate consumption depends on income, Y , and the real interest rate, r', according to Cª = 100 + 0.7Y – 200r. Xanadu's GDP is Y = 1000and government spending on goods and services is G = 180. xanadu's desired future capital stock is given by %3D K* = 140 – 100uc %3D where UC denotes the user-cost of capital. The price of capital is PK = 2, the physical depreciation rate isd = 0. land the existing capital stock is Ko = 50. evolves according to apital stock between any period t and the following period t+1 K+1 = I, + (1 – d)K, wherel is the level of investment. Assume throughout that net factor payments from abroad (NFP) is equal to zero.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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