Answer to Question #275835 in Macroeconomics for yuyu

Question

The set of equations for an economic model is as follows: 

Y = C + S + T , E = C + I* + G* , C = A + bYD , YD = Y - T , T = T* + tY , B = T – G* 

, Y = E 

A, I* and G* are the exogenous variables for autonomous consumption expenditure autonomous investment, government expenditure, respectively.

The following economic shock has occurred in this economy, ceteris paribus: 

The requirements for housing loans have been tightened.  

Represent this economic shock by drawing an appropriate new function. Mark W2 if the appropriate new function is a withdrawal function, or J2 if the appropriate new function is an injection function, or both. 

Indicate the following after the occurrence of the above economic shock in J-W curve: 

(i) the new equilibrium point as point E2, and 

(ii) the level of new equiliribium output as Y2

Answer 1

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