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The following functions are estimated for an economy :
Consumption Function : C = 200 + 0.75YD
Investment Function : I = 400 - 50i
Government Purchases : G = 200
Taxes : T = 0.2Y
Real demand for money : L = 0.5 - 75i
Nominal money supply : Ms = 900
(Here YD stands for disposable income ; Y for income , and 'i' represents interest rate in percentage points. All other figures are in USD billions)
Now;
Suppose the government purchases are increased from 200 to 300. Estimate the change in income. Has there been any crowding out of private investment ? Represent the information graphically (graph need not be to scale ) (8 marks) (75 words)
By: Jyoti Das ProfileResourcesReport error
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