An American farmer sells a truckload of sugar cane to an American sugar refinery for $500.The refinery extracts the sugar from the sugar cane and…
September 3, 2020
The following are possible characteristics related to different market structures, EXCEPT:
September 3, 2020

Consider a Keynesian model with the following specifications:C = a + b(Y − T) − cr   I = i0 − i1r   Md = c0 + c1Y − c2r   P¯ = 1   {a, b, c, i0, i1, c0, c1, c2} = {5, 0.75, 0.2, 1.5, 0.8, 3, 0.3, 0.4}Suppose the policy makers in this economy are proposing an increase in taxes T such that∆T = 10. Find the output absorbed by the change interest rate due to this shock. Notethat this is NOT the change in equilibrium output. In fact, it is the reverse of the CrowdingOut effect.

A. 10.4

B. 22.5

C. 30

D. 7.5

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