Question
Hi, need help in answering this question regarding the Australian economy being effected by covid-19. Assume the following data for the Australian economy (in billion
Hi, need help in answering this question regarding the Australian economy being effected by covid-19.
Assume the following data for the Australian economy (in billion $) then answer the questions that follow.Assume I, G and NX are independent of the level of income:
C = 120 + 0.6Y
I = 230
G = 330
NX = +60
1) Calculatethe marginal propensity to consume andcalculatethe value of the expenditure multiplier.
2) At whatvalueof Real GDP does equilibrium exist?
3) Assume Potential RGDP = $2,000 billion.Does this economy have an inflationary or recessionary gap?What is the value of this gap?
4) Byhow muchwill the government need tochange Government spendingandin what direction, so that equilibrium RGDP equals Potential RGDP?
5) If the government decided tochange income tax, by how much will the Government need tochange taxation-andin what direction?
6) Are your answers to parts 4 and 5 the same?Briefly explain why or why not.
7) What is the economic objective of this type of fiscal policy in regard to the level and type of unemployment?
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