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IMPORTANT: In this question, the letter A is the last four digits of your student number. Suppose that the economy of Country 1 is characterized
IMPORTANT: In this question, the letter A is the last four digits of your student number. Suppose that the economy of Country 1 is characterized by the following behavioral equations: Variable Equation Consumption: C = A+ 0.6 YD Taxes: T = 200 + (A / 20000) Y Investments: 1 = 1000 + 0.1 Y Government expenditures: G = 100 Net exports: NX = 300 - 0.2 Y where Y denotes the real GDP and YD denotes the disposable income (YD = Y - T). Suppose that the output gap in Country 1 is measured as -5000. What should be the increase in government expenditures in order to close the gap and make the economy to reach its potential level of GDP
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