homework4fall2007

homework4fall2007 - Economics 102 Fall 2007 Homework 4 1....

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Economics 102 Fall 2007 Homework 4 1. You are given the following aggregate expenditures and output information as well as the table below describing investment and savings behavior for a small open economy with a balanced budget. GDP = 50,000 C = 25,000 X = 8,000 M = 12,000 a. Assume a linear relationship, and find the demand equation for the loanable funds market. b. Assume a linear relationship, and find the supply equation for the loanable funds market. (Note: Check Capital Inflows (KI)) c. What is the equilibrium investment spending in this economy? d. What is private savings in this economy? e. What is government expenditure for this economy? 2. If you were a classical economist, what would your opinion be if you overheard the following statements? Do you agree or disagree with the statements and why? a. “The interest rate is rising too fast; we should increase government spending to reduce it!” b. “We are heading toward a recession; the government could slow this if they were to
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homework4fall2007 - Economics 102 Fall 2007 Homework 4 1....

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