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Questions 23, 24 and 25 are based in the following economy This year the government of Swaziland spent 200 million Swazi Lilangeni (their local currency).

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Questions 23, 24 and 25 are based in the following economy This year the government of Swaziland spent 200 million Swazi Lilangeni (their local currency). As a consequence, they ran a budgetary deficit of 100 million Swazi Lilangeni. This deficit crowded out all private investment in the country for this year. You are requested to illustrate that situation with the following information for the goods and services market: C = 100 + 0.8 * Yd; ii) Taxes are collected as a lump sum. You could calculate their value with the information provided above but just in case... T = 100; iii) I = 1150 - 467; where r is the interest rate expressed in percentage points and other variables (Y, C, I, G) are expressed in million (Swazi) Lilangeni. Note that as seen in your Macroeconomics course, Yd is not the same as Y. As for the money market, you know the following:iv) = 4Y - 80r, and MS V) P = 2'400 23) What is the interest rate in equilibrium? a. 10% b. 20% C. 25% d. None of the above. 24) How much is consumption in equilibrium? a. 0. b. 800. C. 900. d. 1100. 25) Imagine that the government cannot continue running a budget deficit and must bring its budget back to equilibrium. At the same time, the objective is to keep the national income as high as possible. What would you do? Increase taxes or reduce expenditure? a. Reduce expenditure. b. Increase taxes. C. The policies are equivalent, so either of the two. d. Cannot be determined without more information

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