What real interest rate should the Fed set to bring the economy to full employment?

For the economy described below: C = 2600 + 0.5(Y T) 12000r I p = 1800 12000r Show more For the economy described below: C = 2600 + 0.5(Y T) 12000r I p = 1800 12000r G = 2200 NX = 0 T = 3500 a. Suppose that potential output Y* equals 5860. What real interest rate should the Fed set to bring the economy to full employment? You may take as given that the multiplier for this economy is 2. Instruction: Enter your response as an integer value. Real rate of interest: ________ %. b. Suppose that potential output Y* equals 4900. What real interest rate should the Fed set to bring the economy to full employment? You may take as given that the multiplier for this economy is 2. Instruction: Enter your response as an integer value. Real rate of interest: ______%. c. Show that the real interest rate determined in part a sets national saving equal to planned investment when the economy is at potential output. This result shows that the real interest rate must be consistent with equilibrium in the market for saving when the economy is at full employment. Instruction: Enter your response as an integer value. Planned investment I p =____ . National saving S = ____. Show less

Place New Order
It's Free, Fast & Safe

"Looking for a Similar Assignment? Order now and Get a Discount!

Feeling Lucky?

Enter your email address to spin the wheel for a chance to win exciting offers.