Question
C = 65 + 0.9Y d (Y d is disposable income) I = 320 (Investment spending) G = 280 (Government purchases) NT = 0.2Y (Net
C = 65 + 0.9Yd (Ydis disposable income)
I = 320 (Investment spending)
G = 280 (Government purchases)
NT = 0.2Y (Net taxes)
X = 35 (Exports are constant)
IM = 0.22Y (Imports depend positively on our own Y)
a)Calculate the equilibrium Y.
b)Find the autonomous multiplier.
c)Find the government budget balance BB, given your Y in (a).
d)Oil prices have been rising recently. Higher crude oil prices translate to higher costs for gasoline, plastic and many products. Suppose the higher oil prices translate to our investment spending dropping from 320 to 120 due to a weaker investment confidence. Find the new Y.
e)Find the BB as a result of the drop in investment spending.
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