39. An economy described by the AS/AD model: C = 13+.8YD, I = 10, T = 10, t =.25, G = 35, NX=10-SP-.1Yand AS = 5P. The government will reduce G to levels that will balance the trade deficit so that nx₂ = 0. Provide diagrams for AE/45, AS/AD and NX to illustrate and quantify this policy change.

39. An economy described by the AS/AD model: C = 13+.8YD, I = 10, T = 10, t =.25, G = 35, NX=10-SP-.1Yand AS = 5P. The government will reduce G to levels that will balance the trade deficit so that nx₂ = 0. Provide diagrams for AE/45, AS/AD and NX to illustrate and quantify this policy change.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: Fiscal Policy, Incentives, And Secondary Effects

Section: Chapter Questions

Problem 5CQ

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Please solve the whole question and show all mathematical steps. Also provide 3 diagrams as needed in question.

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39. An economy described by the AS/AD model: C = 13+.8YD, I = 10, T = 10, t =.25, G = 35, NX = 10-5P-.1Yand AS = 5P. The
government will reduce G to levels that will balance the trade deficit so that nx2 = 0. Provide diagrams for AE/45, AS/AD
and NX to illustrate and quantify this policy change.
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