Calculate the equilibrium level of income, Macroeconomics

The economy of Macroland has a balanced budget with fixed government expenditures G = 150 and T = 150.

Investment is autonomous: I = 200.

The consumption function is the following: C(Yd) = 250 + 0.75 (Yd).

a)   Calculate the equilibrium level of income (Y). Solve for the equilibrium level of  consumption.

b)   Show how to obtain the equilibrium graphically.

c)     The government wants to increase the equilibrium level of output and has several options:

-  Increase the government expenditure by 100.

-  Decrease the taxes by 100.

-  Increase the government expenditure by 100 and increase the taxes by 100 at the same time (in order to keep the budget balanced).

Calculate for each possibility the multiplier and the possible new equilibrium income. Which one would you suggest to the government? Explain your answer.

Posted Date: 3/12/2013 7:14:11 AM | Location : United States







Related Discussions:- Calculate the equilibrium level of income, Assignment Help, Ask Question on Calculate the equilibrium level of income, Get Answer, Expert's Help, Calculate the equilibrium level of income Discussions

Write discussion on Calculate the equilibrium level of income
Your posts are moderated
Related Questions
In 1999 Mercedes-Benz USA adopted a new pricing policy, which it called NFP (negotiation-free process), that sought to eliminate price negotiations between customers and new-car de

An HMO has a point of service option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $20

Explain whether, the following statements are TRUE, FALSE or UNCERTAIN. Briefly justify your answer. (i) The circular flow shows how real resources and financial payments flow

Question 1: Consider a two-period, two-person pure exchange economy. Utility functions and endowments are given as follows. u1(x0; x1) = (x0x1)2 and e1 = (18; 4) u2(x0; x1) = ln x0

factors affecting national income

What are the important tools to consider Monetary Policy? Important tools to consider Monetary Policy: a. What the money demand curve is b. Why the liquidity preference m

For this question you will use the dataset "march01.dat", which includes wages (column 1), age (column 2), a dummy variable indicating females (column 3), and years of education (c

In a large open economy, if the economy has a fiscal expansion, what would happen in the solow model?

A biologist working in the Outback of Australia is studying the effects of land-use by tourists (campers, fishers, etc.) on vegetation cover in a river gorge of the outback. There

Bayer Schering Pharma AG, Germany owns the Alka-Seltzer, which was launched in 1931 and was meant for relief of minor aches, pains, inflammation, fever, headache, heartburn, sour s