1. President Nellie L. Inzer is faced with a severe recession where real aggregate output is $15 trillion. Unemployment rates hover at 10%, and at full employment the CBO estimates that the national income should be $18 trillion; in addition, your statisticians have calculated that your citizens consume an additional 80 dollars 100 dollars they receive in additional disposable income. Having taken her dad's Honors Economics for every class, President Nellie ponders an economic solution--she's halted all international trade and has fixed interest rates. She is faced with three possible decisions from her Council of Economic Advisors to fight this major recession I. Lower taxes for her citizens by $500 billion. II. Buy $500 billion in "green" technologies (goods and services) aimed at making the American government more eco-friendly. III. Reduce government expenditures on goods and services by $700 billion while simultaneously increasing Transfer payments to citizens by $900 billion. Assume that these measures may not affect each other and that the net effects can be calculated simply without regard to the multitude of variables one might think occurs. Ignore reality a bit.

1. President Nellie L. Inzer is faced with a severe recession where real aggregate output is $15 trillion. Unemployment rates hover at 10%, and at full employment the CBO estimates that the national income should be $18 trillion; in addition, your statisticians have calculated that your citizens consume an additional 80 dollars 100 dollars they receive in additional disposable income. Having taken her dad's Honors Economics for every class, President Nellie ponders an economic solution--she's halted all international trade and has fixed interest rates. She is faced with three possible decisions from her Council of Economic Advisors to fight this major recession I. Lower taxes for her citizens by $500 billion. II. Buy $500 billion in "green" technologies (goods and services) aimed at making the American government more eco-friendly. III. Reduce government expenditures on goods and services by $700 billion while simultaneously increasing Transfer payments to citizens by $900 billion. Assume that these measures may not affect each other and that the net effects can be calculated simply without regard to the multitude of variables one might think occurs. Ignore reality a bit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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