Explain the difference between the following two expressions: Y = C(Yd) + I + G + CA(EP /P, Yd) and Y = C + I +G + CA
What will be an ideal response?
The first one represents a behavioral equation and thus may express equilibrium condition for the output market or the aggregate desired demand for output. The second equation is only an identity that is always true.
Economics
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Assume a simplified banking system subject to a 25 percent required reserve ratio. If there is an initial increase in excess reserves of $100,000 . the money supply:
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