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Problem 2: Long-Term Government Deficits [10 Points] Suppose that a local economy has the following values for Desired C, I, G, and NX at a
Problem 2: Long-Term Government Deficits [10 Points] Suppose that a local economy has the following values for Desired C, I, G, and NX at a price level of 100 given by: c = 6,000 + 0.9(1 t)Y I = 3,100 G = 900 NX = 2,000 0.06Y The tax rate (t) is equal to 10%. For every $1 increase in the price level, Autonomous Consumption (C) and Autonomous Investment (I) each decrease by $1. It also has an aggregate supply (AS) given by: AS = 2p 10. What is the Short-Run Real GDP in this economy? Show your work. [4 points]
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