Question
The Turkish economy is known to be the largest producer of hazelnuts and cherries in the world. Assume their economy can be described by the
The Turkish economy is known to be the largest producer of hazelnuts and cherries in the world. Assume their economy can be described by the following:
Consumption (C)=80+0.75Yd Investment (I)= 200
Government Spending (G)=350 Taxes (T) =380
Exports (EX)= 150 Imports (IM)=0.25 Yd
Dispoable Income Yd =Y-T
a. Determine the amount of surplus/deficit in the economy. (1.5 marks)
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b. Calculate equilibrium output in this economy. (1.5 marks)
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c. Suppose government spending increased by 50, calculate the new equilibrium level. (1.5 marks)
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d. Illustrate your answer in (c-d) on a well labelled diagram. (1.5 marks)
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