1. Suppose the MPC is .90 and the MPI is .10. if government expenditure goes up $100 billion while taxes fall $10 billion, what happen to the equilibrium level of real GDP? Use following equations for exercise 2-4 C= $100 + .8Y I=$200 G= $250 X = $100 - .2Y 2. What is the equilibrium level of real GDP? 3. What is the new equilibrium level of real GDP if government spending increases by $150?
1. Suppose the MPC is .90 and the MPI is .10. if government expenditure goes up $100 billion while taxes fall $10 billion, what happen to the equilibrium level of real
Use following equations for exercise 2-4
C= $100 + .8Y
I=$200
G= $250
X = $100 - .2Y
2. What is the equilibrium level of real GDP?
3. What is the new equilibrium level of real GDP if government spending increases by $150?
4. What is the new equilibrium level of real GDP if government spending and taxes both increase by $150?
5. Make a graph showing the spending and tax revenue of your state government for as many years as you can find (use the government of your home country if you are not from the United States). What trends do you notice? What spending categories make up the largest share of the state budget? What are the largest sources of revenue?
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