Please refer to this question as you answer the one attached since they are linked.a)What is equilibrium income in hypothetica,what is the government deficit? What is the current account balance? d. If exports are fixed at EX = 25, what must income be toensure a current account balance of zero? (Hint: Importsdepend on income, so what must income be for imports tobe equal to exports?) By how much must we cut governmentspending to balance the current account? (Hint: Use youranswer to the first part of this question to determine howmuch of a decrease in income is needed. Then use the multi-plier to calculate the decrease in G needed to reduce incomeby that amount.) (1) Consumption function: C = 100 + .8Y,(2) Planned investment:I= 38(3) Government spending: G=75(4) Exports: EX = 25(5) Imports: IM = .05 Y4(6) Disposable income: Y = Y- T(7) Taxes: T= 40%3D(8) Planned aggregate expenditure:AE = C+I+ G+ EX– IM(9) Definition of equilibrium income: Y = AE

Answer- Need to find- equilibrium income in hypothetical,what is the government deficit? What is the…

Answered: Please refer to this question as you…

Please refer to this question as you answer the one attached since they are linked. a)What is equilibrium income in hypothetica,what is the government deficit? What is the current account balance

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 7SQ

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Question

Please refer to this question as you answer the one attached since they are linked.

a)What is equilibrium income in hypothetica,what is the government deficit? What is the current account balance?

d. If exports are fixed at EX = 25, what must income be to
ensure a current account balance of zero? (Hint: Imports
depend on income, so what must income be for imports to
be equal to exports?) By how much must we cut government
spending to balance the current account? (Hint: Use your
answer to the first part of this question to determine how
much of a decrease in income is needed. Then use the multi-
plier to calculate the decrease in G needed to reduce income
by that amount.)

(1) Consumption function: C = 100 + .8Y,
(2) Planned investment:I= 38
(3) Government spending: G=75
(4) Exports: EX = 25
(5) Imports: IM = .05 Y4
(6) Disposable income: Y = Y- T
(7) Taxes: T= 40
%3D
(8) Planned aggregate expenditure:
AE = C+I+ G+ EX– IM
(9) Definition of equilibrium income: Y = AE

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