Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose as economy is described by the following functions: C- 300+0.8YD; /- 200; G = 150; TR - 50, and t = 0.10, EX -
Suppose as economy is described by the following functions: C- 300+0.8YD; /- 200; G = 150; TR - 50, and t = 0.10, EX - 200; IM - 250 a) Calculate the equilibrium levels of Y, and C. b) Calculate the budget surplus, BS. c) If the government would like to increase the equilibrium level of output (Y) to the full- employment level, Y* = 2,500, by how much should government purchases (G) be changed? d) On a diagram of the Keynesian model of income determination indicate the change in equilibrium income generated by the change in G in part b). Label your graph (axes, autonomous spending, the initial equilibrium output etc.) e) Suppose Congress decides to reduce transfer payments but to increase government purchases of goods and services by an equal amount. That is, it undertakes a change in fiscal policy such that AG - - ATR - 20. Find the new equilibrium real GDP. What is the change in the budget surplus? Why has the BS changed
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started