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Derivation of aggregate demand equation.

The following relations describe the imaginary economy of starter land:

Y=C + I + G + X .....(1)
C= 220 + 0.63Y......(2)
I=1000- 2000R ......(3)
G= Go............ (4)
X= 525- 0.1Y- 500R............(5)
M=(0.1583Y - 1000R)P...........(6)

(a) Briefly elucidate why net export is inversely related to interest rate in equation#5.

(b) Derive the expression for aggregate demand curve also elucidate why it is an aggregate demand equation.

(c) Find the general equilibrium real output(y) also interest rate(R) in this economy given which government purchases are 1200, money supply is 900 also price level is one.

(d) Determine the level of aggregate consumption, investment also net export in this economy. (Limit Computed values to 9 decimals points.)

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916630

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