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Hey :) Having a bit of issue knowing how to answer these questions, can you please help me out? Consider a closed-economy aggregate expenditure model

Hey :) Having a bit of issue knowing how to answer these questions, can you please help me out?

Consider a closed-economy aggregate expenditure model with the following function:

Ct= c0+ c1YD,t-1,

YD,t= Yt- Tt,

It= I,

Zt= Ct+ Gt+ It.

Equilibrium is given by Yt= Zt.

The parameters, c0, I, and c1, do not change over time; c0= 200, I = 100, c1= 0.5.

(a) Suppose Gt= Tt= 100, for all t < 10. Find the steady state (where all variables are time independent) level of output associated with these parameter values. Assume that the economy is at this steady state, for t < 10.

(b) At t = 10, suppose government spending increases to Gt= 108, and remains at this level forever. There is no change in taxation. Find the steady state output associated with this new level of government spending. Calculate the (equilibrium) values for Yt, for t = 10, 11, 12, 13 (given that Gt= 100, for all t < 10).

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