Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150 a. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. b. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?
Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150 a. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G. b. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 6TY
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Consider an economy with the following situation: C = 50 +0.8 Yd I=100;T= 100 G =150
a. To eliminate the gap, the government decides to change its expenditure G. By how much should G change? Show that income AE or Ye is now 900 after the change in G.
b. If the government decides to adopt balanced budget spending, by how much G and T will change to reach full employment output or income?
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