(A)(8/ 100)= .08 = 8% unemployment 8 Million unemployed Consumption $275 Population (B)$275+$50+$40($20- $350-$355 120 30)=$355 Billion Investment $50 Labor Force 100 Exports $20 Employed 92 (D) (i): Change in Real Output = (Change in Autonomous Spending) Imports $30 (1 - Marginal Propensity to Consum Government Spending $40 Expected Inflation Rate 3% Change in Real Output = (-$20 billic Taxes $10 / (1 -0.2) Change in Real Output = Potential Real Output $350 (-$20billion) / 0.8 Change in Real Output = (a) Calculate the actual rate of unemployment. Show your work. Actual unemployment rate is 8%-$25billion (b) Is the economy facing a recessionary gap, an inflationary gap, or neither? Explain using numbers. (c) Based on your answer to part (b). how will the economy adjust in the long run in the absence of any government policy action? Explain d) Now assume the economy is in long-run equilibrium. 1) Assume autonomous consumption spending decreases by $20 billion and the marginal propensity to save is 0.2. Calculate the maximum possible change in real output. Show your work. (ii) Based on the change in autonomous consumption spending, what will happen to the equilibrium price level in the short run? Explain. (e) Based on the change in real output identified in part (d)(1), is the actual rate of unemployment greater than, less than, or equal to the natural rate of unemployment in the short run? Explain. (f) Based on loanable funds market analysis. how will a decrease in tax revenue affect the equilibrium real interest rate? Explain. (g) Based solely on the change in the equilibrium real interest rate identified in part (f), what will be the effect on each of the following? (D) (ii) With a decrease in income (1 The price of previously issued bonds. Explain. taxes, disposable income will (ii) Potential real output. Explain. increase, leading to an increase consumption. This will shift the