ECON 2450 Chapter Notes -Real Interest Rate, Autarky

• School: York University
• Department: Economics
• Course: ECON 2450
• Professor: Frank Marchese

Document Summary

Derive the is curve for this economy: real gdp as a function of all the unspecified variables in the economy. Suppose that the foreign interest rate rf is 5%, that total foreign income yf is ,000 billion, and that government spending g is billion. In this economy, the mpe is cy(1 t) imy = 0. 1. A0 = c0 + i0 + g + xfy f+ 0. 4 (100 + 10rf)=460 + 0. 01yf + 40 rf + g. Y = 880/. 9 [1,400/. 9]r = 977. 8 1555. 6 r. At an interest rate of 3% (i. e. , r=0. 03), y = . 1 billion. At an interest rate of 5% (i. e. , r=0. 05), y = billion. At an interest rate of 7% (i. e. , r=0. 07), y = . 9 billion. In this version of the economy, the mpe is cy(1 t) = 0. 3. In this economy, the level of a0, of non-interest-sensitive autonomous spending is: A0 = c0 + i0 + g = 460 + g.