QUESTION 2.Consider the following equations:MP Curve:r = 1 + 0.5 TY = 1400 - 300r,IS Curve:Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is theinflation rate in percentage points.b)change in real GDP and show this effect on graphs of the MP, IS and AD curves (make sure toindicate all intercepts and labels in your graphs).Assume that the inflation rate in the economy decreases from 2.5 to 2%. Calculate the

MP and IS curve intersection shows the money market equilibrium situation where IS curve shows…

équations: MP Curve: r = 1 + 0.5 T 1400 300r, IS Curve: Y = Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is the inflation rate in percentage points. Assume that the inflation rate in the economy decreases from 2.5 to 2%. Calculate the b) change in real GDP and show this effect on graphs of the MP, IS and AD curves (make sure to indicate all intercepts and labels in your graphs).

équations: MP Curve: r = 1 + 0.5 T 1400 300r, IS Curve: Y = Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is the inflation rate in percentage points. Assume that the inflation rate in the economy decreases from 2.5 to 2%. Calculate the b) change in real GDP and show this effect on graphs of the MP, IS and AD curves (make sure to indicate all intercepts and labels in your graphs).

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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