Question
An economy is described by the following equations: C = 40 + 0.8 ( Y - T ) I p = 70 G = 120
An economy is described by the following equations:
C= 40 + 0.8 (Y-T)
Ip= 70
G= 120
NX= 10
T= 150
Y*= 580
The multiplier in this economy is 5.
a.Find a numerical equation relating planned aggregate expenditure to output.
Instruction:Enter your response for mpc rounded to one decimal place.
PAE=+Y.
b.Construct a table to find the value of short-run equilibrium output.
Instruction:If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.
OutputY
Planned aggregate expenditure (PAE)
Y-PAE
400
500
600
700
800
Short-run equilibrium output is.
c.By how much would government purchases have to change in order to eliminate any output gap? By how much would taxes have to change?
Instruction:Enter your responses rounded to one decimal place.
In order to eliminate any output gap, government purchases would have to be(Click to select)
increased
reduced
by.
In order to eliminate any output gap, taxes would have to be(Click to select)
increased
reduced
by.
d.IfY* = 630, then by how much would government purchases have to change in order to eliminate any output gap? By how much would taxes have to change?
Instruction:Enter your responses as integer values.
In order to eliminate any output gap, government purchases would have to be(Click to select)
reduced
increased
by.
In order to eliminate any output gap, taxes would have to be(Click to select)
increased
reduced
by.
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