An economy is described by the following equations:

C= 40 + 0.8 (Y-T)

I^p= 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.