Discuss a hypothetical economy where both the price

Reference no: EM1336604

Hypothetical economy where both the price level and interest rates are fixed

Assume the following equations (in billions of dollars) describe a hypothetical economy where both the price level and interest rates are fixed.

C=110 + 0.75(YD)
YD= Y - NT
NT = 0.2Y
I = 175
G = 80
EX = 70
IM = 30 + 0.1Y

*NOTE: NT means net taxes. YD means disposable income.

i) What is the equilibrium level of income (real GDP) in this economy?

ii) Calculate the autonomous expenditure multiplier for this economy

iii) Graph the aggregate expenditure function to show autonomous aggregate expenditure, the slope of the aggregate expenditure function and equilibrium income

iv) What changes in government spending would be necessary to move the present equilibrium GDP (calculated for part (i) above) to the full employment level of 1000

v) What changes in transfer payments would be necessary to move the economy towards full employment GDP of 1000.

Reference no: EM1336604

Questions Cloud

Elucidate why the mp-p relation is deficient : Elucidate why the MP/P relation is deficient as the sole mechanism for determining the optimal level of resource.

Discussing drugs and crime : What do you think has more effect on a person's inclination to abuse drugs: social factors or psychological factors?

Explain marketing concepts and marketing managers : Explain Marketing concepts and marketing managers and Strategies to engage shareholders in new product development

Find the break even point in units for proposal : Find the break-even point in units for proposal A.

Discuss a hypothetical economy where both the price : Suppose the following equations discuss a hypothetical economy where both the price level and interest rates are fixed.

Illinois whistleblower statute : Your explanation must apply a professional code of ethics or ethical philosophical approach. What protection might you have under the Illinois whistleblower statute?

Write down a shell script to send a customized : Write down a shell script to send a customized mail message to the users listed on the command line by login (user) name, only if they are currently logged on. If no users are listed on the command line, an error message should be printed.

Lucidate what will happen to the economy in the short run : If the government decides to intervene to return the economy to full employment, elucidate what will happen to the economy in the short run and in the long run.

Explain important information about marketing discussion : Explain Important information about Marketing Discussion and Most discussions of marketing strategy focus on large businesses like Procter and Gamble

User Account

All Pages