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Suppose you have the following macroeconomics data (all units are millions of US dollars). C=260+0.4(YT). Government spending, G=200 Tax on consumption, T=150 Export, X=30 Import,
Suppose you have the following macroeconomics data (all units are millions of US dollars). C=260+0.4(YT). Government spending, G=200 Tax on consumption, T=150 Export, X=30 Import, M=50 National saving, S=260 Full employment real GDP: YFP=1,220 1. Derive the aggregate expenditure expression, AE=a0+a1(YT), where a0 and a1 are constants to be determined. (1 mark) 2. Find the equilibrium level of real GDP (Y) and the multiplier, k. ( 1 mark) 3. Graph the AE curve and the YFP on the same diagram and show all critical points including the equilibrium level of real GDP (Y). What will be the macroeconomic result? ( 2 marks) 4. Let export decrease by 60%. How can the government counterbalance (numerically) the decrease in export by using tax as a policy instrument? ( 1 mark) Suppose you have the following macroeconomics data (all units are millions of US dollars). C=260+0.4(YT). Government spending, G=200 Tax on consumption, T=150 Export, X=30 Import, M=50 National saving, S=260 Full employment real GDP: YFP=1,220 1. Derive the aggregate expenditure expression, AE=a0+a1(YT), where a0 and a1 are constants to be determined. (1 mark) 2. Find the equilibrium level of real GDP (Y) and the multiplier, k. ( 1 mark) 3. Graph the AE curve and the YFP on the same diagram and show all critical points including the equilibrium level of real GDP (Y). What will be the macroeconomic result? ( 2 marks) 4. Let export decrease by 60%. How can the government counterbalance (numerically) the decrease in export by using tax as a policy instrument? ( 1 mark)
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