Answer to Question #324791 in Macroeconomics for Dan

Question

Suppose a closed economy is represented by the following information in the short run:

Marginal propensity to save = 0.4

T = 40 + 0.1Y

Md = 200(2 – 4i).

All else equal, if new homes to the value of R100 were constructed in the year 2018, which of the following is correct?

(I) Demand for money would have risen by R100 in 2018.

(II)As a result, equilibrium income increased to approximately R217 in 2018.

(III)If the money supply is R300 the new equilibrium interest rate would have been approximately 32% percent in 2018.

A.Only (II) is correct.

B.Only (III) is correct.

C.(I) and (II) are correct.

D.(I) and (III) are correct.

E.(II) and (III) are correct.

Answer 1

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