10- economy, which are desired consumption (Cª), taxes (T), government spending (G), investment (Iª) and net exports (NX¢) are given as follows: Assume that the factors affecting the aggregate expenditures of the sample Cd= 600+0.6 YD, T= 100 +0.2Y, G= 400, Id = 300, NXd = 200 – 0.1Y. (a) According to the above information, explain in your own words how the tax collection changes as income in the economy changes? (b) Write the expression for YD (disposable income). (c) Find the equation of the aggregate expenditure line. Draw it on a graph and show where the equilibrium income should be on the same graph. (d) State the equilibrium condition. Calculate the equilibrium real GDP level. (e) What is the value of expenditure multiplier in this economy? If the government expenditure increases by 100 (i.e. AG=100), what will be the change in the equilibrium income level in this economy? What will be the new equilibrium level of real GDP? (f) Suppose that the potential GDP in this country is 3000. What is the output gap? How much should government change its spending (i.e. AG=?) to close the output gap?

10- economy, which are desired consumption (Cª), taxes (T), government spending (G), investment (Iª) and net exports (NX¢) are given as follows: Assume that the factors affecting the aggregate expenditures of the sample Cd= 600+0.6 YD, T= 100 +0.2Y, G= 400, Id = 300, NXd = 200 – 0.1Y. (a) According to the above information, explain in your own words how the tax collection changes as income in the economy changes? (b) Write the expression for YD (disposable income). (c) Find the equation of the aggregate expenditure line. Draw it on a graph and show where the equilibrium income should be on the same graph. (d) State the equilibrium condition. Calculate the equilibrium real GDP level. (e) What is the value of expenditure multiplier in this economy? If the government expenditure increases by 100 (i.e. AG=100), what will be the change in the equilibrium income level in this economy? What will be the new equilibrium level of real GDP? (f) Suppose that the potential GDP in this country is 3000. What is the output gap? How much should government change its spending (i.e. AG=?) to close the output gap?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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