Q1. The values of parameter and exogenous variables of the Simple Keynesian Macroeconomic Model are given below. Compute the solution values of endogenous variables and show the solution graphically.

%% ECON 407: Macroeconomic Model

disp('Keynesian Macroeconomic Model')

%% Exogenous Variables

C0=800; % Autonomous Consumption

I=1000; % Investment

G=500; % Government Expenditure

T=500; % Tax Revenue

%% Parameters

c=0.75; % MPC. (0

%% Model 1

% AE=C+I+G; % Aggregate Expenditure

% C=C0+c*(Y-T); % Consumption Function

% Y=AE; % Equilibrium Condition: GDP = Income = Expenditure

%% Solution of the Model

m= % Multiplier: m=(1/1-c)

Y= % Equilibrium Solution of Y by Substitution Method

Yd= % Disposable Income: Yd=Y-T

C= % Consumption Function: Y=C0+c*Yd

B= % Budget Deficit B=T-G

disp('--------------------------------------------- ');

disp('Solution of the Model 1:');

disp('--------------------------------------------- ');

disp('Aggregate Expenditure AE = C+I+G');

fprintf('Consumption Function C = %g+%g(Y2-T) ',C0,c););

fprintf('Investment I = );

fprintf('Government G = );

fprintf('Consumption C = );

fprintf('Gross Domestic Product Y = );

fprintf('Disposable Income Yd = );

fprintf('Budget Deficit B = );

disp('------------------------------------------------')

%% Plot Macroeconomic Model 1

subplot( );

Y=0:9000;

C=C0+c*(Y-T);

AE=C+I+G;

Y45=Y;

hold on;

yline( ,'k-.', 'G= ');

yline( ,'k', 'I= ');

yline(0);

plot(Y,C,'b', Y,Y45,'r', Y,AE,'b')

xlabel('Gross Domestic Product, Y'), ylabel('Aggregate Expenditure, AE, C, I, G');

title('Macroeconomic Model 1');

ylim([-500,9000]); xlim([0,9000]);

%% Fiscal Policy: DG=200;

disp('Fiscal Policy: Tax Reform');

disp(' Increase in G: DG=200');

disp(' New Level of G: G2=700');

%% Model 2

% AE2=C2+I+G2; % Aggregate Expenditure

% C2=C0+c*(Y2-T); % Consumption Function

% Y2=AE2; % Equilibrium Condition: GDP = Income = Expenditure

%% Solution of the Model

G2=G+200; % New value of Government Expenditure

Y2= ; % Solution of the Equilibrium Income by Substitution Method

Yd2= ; % Disposable Income

C2= ; % C2=C0+c*Yd2

B2= ; % Budget Deficit

disp('---------------------------------------------- ');

disp('Solution of the Model 2:');

disp('---------------------------------------------- ')

disp('Aggregate Expenditure AE2 = C2+I+G2');

fprintf('Consumption Function C2 = %g+%g(Y2-T) ',C0,c);

fprintf('Investment I = );

fprintf('Government G2 = );

fprintf('Consumption C2 = );

fprintf('Gross Domestic Product Y2 = );

fprintf('Disposable Income Yd2 = );

fprintf('Budget Deficit B2 = );

fprintf(' Multiplier: m = );

disp('-----------------------------------------------')

%% Plot Macroeconomic Model 2

subplot( );

Y=0:9000;

C2=C0+c*(Y2-T);

AE2=C+I+G2;

Y45=Y;

hold on;

yline( ,'k-.','G2=');

yline(,'k','I=');

yline(0);

plot(Y,C,'b', Y,Y45,'r', Y,AE,'b')

xlabel('Gross Domestic Product, Y'), ylabel ('Aggregate Expenditure, AE2, C2, I, G2');

title('Macroeconomic Model 2');

ylim([-500,9000]); xlim([0,9000]);

%% Plot Budget Deficit

subplot( );

Y=0:9000;

yline(,'k-.','G2=');

yline(,'b','T=');

yline(-,'r','B2=');

yline(0);

xlabel('Gross Domestic Product, Y'), ylabel ('G2, T2, B2');

title('Macroeconomic Model 2');

ylim([-500,9000]); xlim([0,9000]);