Answer the given question with a proper explanation and step-by-step solution. the value of a is 1334 IMPORTANT: In this question, the letter A is the last four digits of your student number.Suppose that the economy of Country 1 is characterized by the following behavioral equations:VariableConsumption:Taxes:Investments:Government expenditures:Net exports:EquationC = A + 0.6 YDT = 200+ (A/20000) YI= 1000+ 0.1 YG = 100NX = 300 -0.2 Ywhere Y denotes the real GDP and YD denotes the disposable income (YD=Y-T).Suppose that the output gap in Country 1 is measured as -5000. What should be the increase ingovernment expenditures in order to close the gap and make the economy to reach its potentiallevel of GDP?

To find the amount the of government expenditure in order to fill the output gap we will find the…

Suppose that the output gap in Country 1 is measured as -5000. What should be the increase in government expenditures in order to close the gap and make the economy to reach its potential level of GDP?

Suppose that the output gap in Country 1 is measured as -5000. What should be the increase in government expenditures in order to close the gap and make the economy to reach its potential level of GDP?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Answer the given question with a proper explanation and step-by-step solution.

the value of a is 1334

IMPORTANT: In this question, the letter A is the last four digits of your student number.
Suppose that the economy of Country 1 is characterized by the following behavioral equations:
Variable
Consumption:
Taxes:
Investments:
Government expenditures:
Net exports:
Equation
C = A + 0.6 YD
T = 200+ (A/20000) Y
I= 1000+ 0.1 Y
G = 100
NX = 300 -0.2 Y
where Y denotes the real GDP and YD denotes the disposable income (YD=Y-T).
Suppose that the output gap in Country 1 is measured as -5000. What should be the increase in
government expenditures in order to close the gap and make the economy to reach its potential
level of GDP?

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