b) Show that the activity Y when the parliamentary majority increases Ip by 100 so that Alp = 100 and Ip = 1350 will be over 9000! Show how much the government should increase public spending for that Y> 9500. What justifies such an increase even if the budget balance is weakened?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Exercise 1 (45%):
In the textbook, Model I is the least complicated way to define
the relations in the real economy. Then the activity Y is a
function of exogenous factors explained outside the model.
The model is based on the data found in the National
Accounts and is defined as follows:
Y= Cp + Ip +G+NX
Cp = c(Y-T)+C°
Ip = 1° - bi
NX = NX° - aY
T=T° + tY.
Based on such a model I, we establish a general function for
the real economy which can then be as follows:
Y=T==0+C + 1° + NX° + G - cT° - bi)
The elements that are part of the general macroeconomic
relationship have the following values:
Cp = 0.75 (Y - T) + 1400
Ip = 1250 - 90i
NX = 2800 - 0.3Y
%3D
T= 1200 + 0.19Y
G= 2000
i = 1.5.
%3D
Transcribed Image Text:Exercise 1 (45%): In the textbook, Model I is the least complicated way to define the relations in the real economy. Then the activity Y is a function of exogenous factors explained outside the model. The model is based on the data found in the National Accounts and is defined as follows: Y= Cp + Ip +G+NX Cp = c(Y-T)+C° Ip = 1° - bi NX = NX° - aY T=T° + tY. Based on such a model I, we establish a general function for the real economy which can then be as follows: Y=T==0+C + 1° + NX° + G - cT° - bi) The elements that are part of the general macroeconomic relationship have the following values: Cp = 0.75 (Y - T) + 1400 Ip = 1250 - 90i NX = 2800 - 0.3Y %3D T= 1200 + 0.19Y G= 2000 i = 1.5. %3D
b) Show that the activity Y when the parliamentary majority
increases Ip by 100
so that
Alp = 100 and Ip = 1350 will be over 9000!
Show how much the government should increase public
spending for that
Y> 9500. What justifies such an increase even if the budget
balance is weakened?
c) Take as a starting point figure 5.10 in the textbook where
ten key factors are presented that contribute to influencing
private real investment. Which of these do you think can
create such a growth of Alp = 100?
Transcribed Image Text:b) Show that the activity Y when the parliamentary majority increases Ip by 100 so that Alp = 100 and Ip = 1350 will be over 9000! Show how much the government should increase public spending for that Y> 9500. What justifies such an increase even if the budget balance is weakened? c) Take as a starting point figure 5.10 in the textbook where ten key factors are presented that contribute to influencing private real investment. Which of these do you think can create such a growth of Alp = 100?
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