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1.3 Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 $40 I (planned) $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Y and S = a. Is the economy of Nurd in equilibrium? What is Nurd's equilibrium level of income? What is likely to happen in the coming months if the government takes no action? b. If $200 is the “full-employment" level of Y, what fis- cal policy might the government follow if its goal is full employment? c. If the full-employment level of Y is $250, what fiscal policy might the government follow? d. Suppose Y = Nurd's economy in equilibrium? e. Starting with the situation in part d, suppose ment starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains = 0.2Y4. $200, C = $160, S = $40, and I = $40. Is %3D %3D govern-

1.3 Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 $40 I (planned) $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Y and S = a. Is the economy of Nurd in equilibrium? What is Nurd's equilibrium level of income? What is likely to happen in the coming months if the government takes no action? b. If $200 is the “full-employment" level of Y, what fis- cal policy might the government follow if its goal is full employment? c. If the full-employment level of Y is $250, what fiscal policy might the government follow? d. Suppose Y = Nurd's economy in equilibrium? e. Starting with the situation in part d, suppose ment starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains = 0.2Y4. $200, C = $160, S = $40, and I = $40. Is %3D %3D govern-

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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1.3 Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 $40 I (planned) $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Y and S = a. Is the economy of Nurd in equilibrium? What is Nurd's equilibrium level of income? What is likely to happen in the coming months if the government takes no action? b. If $200 is the “full-employment" level of Y, what fis- cal policy might the government follow if its goal is full employment? c. If the full-employment level of Y is $250, what fiscal policy might the government follow? d. Suppose Y = Nurd's economy in equilibrium? e. Starting with the situation in part d, suppose ment starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains = 0.2Y4. $200, C = $160, S = $40, and I = $40. Is %3D %3D govern-
Transcribed Image Text:1.3 Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 $40 I (planned) $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Y and S = a. Is the economy of Nurd in equilibrium? What is Nurd's equilibrium level of income? What is likely to happen in the coming months if the government takes no action? b. If $200 is the “full-employment" level of Y, what fis- cal policy might the government follow if its goal is full employment? c. If the full-employment level of Y is $250, what fiscal policy might the government follow? d. Suppose Y = Nurd's economy in equilibrium? e. Starting with the situation in part d, suppose ment starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains = 0.2Y4. $200, C = $160, S = $40, and I = $40. Is %3D %3D govern-
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