Question
I was given the following information on my assignment: Using the information below for a four sector economy, calculate the following: C = 500 +
I was given the following information on my assignment:
Using the information below for a four sector economy, calculate the following:
C = 500 + 0.65 Yd
T = 300 + 0.25 Y
I = 400 + 0.1 Y
G = 450 + 0.15 Y
X = 350
M = 200 + 0.2 Y
Yf = 3,572.12
Yd = Y-T
This was what I ended up getting for the equation after I solved the 4 sector model but I don't know if it's right: AE = 1500 + -194.0625Y. regardless if this is correct or not I don't know how to solve the questions.
I have to answer the following questions:
(Assume price remain constant)
Part 1: What is the value of Ye?
Part 2:What is the value of the Govt surplus(+)/deficit(-) at Ye?
Part 3: What is the size of the positive(+)/negative(-) output gap?
Part 4: What change in government spending (increase(+)/decrease(-) is required to close the gap?
Part 5: Suppose that government spending changes to G'=550 + 0.1 Y. What is the value of the new equilibrium income (Ye2)?
Using the new government spending function in Part 5, calculate the following:
Part 6: What is the size of the positive(+)/negative(-) output gap?
Part 7: Change in government spending (increase(+)/decrease(-) required to close the new gap?
How do I answer these questions?
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