(c) Calculate the (equilibrium) values for Y₁, for t= 10, 11, 12, 13. Here you are being asked to calculate the path from the old equilibrium to the new equilibrium.
(c) Calculate the (equilibrium) values for Y₁, for t= 10, 11, 12, 13. Here you are being asked to calculate the path from the old equilibrium to the new equilibrium.
Chapter8: The Keynesian Model
Section: Chapter Questions
Problem 6SQ
Related questions
Question
just c) subpart only please
![Consumption and lags.
Consider a closed-economy aggregate expenditure model where the current period's
consumption depends on the disposable income earned in the previous period; that is, we
have the following representation of the economy as:
Ct = Co + C₁YD.t-1)
YD.t = Y₂ - T₂,
1₂ = 1,
Zt = Ct + It + Gt.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b2e65f2-c472-45bf-885c-00dffce84016%2F6d4763a7-faa4-4086-976c-65c2a5548ceb%2Ff7iedmf_processed.png&w=3840&q=75)
Transcribed Image Text:Consumption and lags.
Consider a closed-economy aggregate expenditure model where the current period's
consumption depends on the disposable income earned in the previous period; that is, we
have the following representation of the economy as:
Ct = Co + C₁YD.t-1)
YD.t = Y₂ - T₂,
1₂ = 1,
Zt = Ct + It + Gt.
![Also, in equilibrium, aggregate supply equals aggregate demand, that is
Yt = Zt.
The parameters, co, I, and c₁, do not change over time and have the values co = 125, I= 50,
C₁ = 0.8.
(a) Suppose G: = T: = 125, for all t < 10. Find the steady state (where all variables are
time-independent) level of output associated with these parameter values. Assume that
the economy is at this steady state, for t < 10.
(b) At t = 10, suppose government spending increases to G: = 140, and remains at this
level forever. There is no change in taxation. Find the steady-state output associated with
this new level of government spending.
(c) Calculate the (equilibrium) values for Y₁, for t= 10, 11, 12, 13. Here you are being
asked to calculate the path from the old equilibrium to the new equilibrium.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b2e65f2-c472-45bf-885c-00dffce84016%2F6d4763a7-faa4-4086-976c-65c2a5548ceb%2Fnmrjdi_processed.png&w=3840&q=75)
Transcribed Image Text:Also, in equilibrium, aggregate supply equals aggregate demand, that is
Yt = Zt.
The parameters, co, I, and c₁, do not change over time and have the values co = 125, I= 50,
C₁ = 0.8.
(a) Suppose G: = T: = 125, for all t < 10. Find the steady state (where all variables are
time-independent) level of output associated with these parameter values. Assume that
the economy is at this steady state, for t < 10.
(b) At t = 10, suppose government spending increases to G: = 140, and remains at this
level forever. There is no change in taxation. Find the steady-state output associated with
this new level of government spending.
(c) Calculate the (equilibrium) values for Y₁, for t= 10, 11, 12, 13. Here you are being
asked to calculate the path from the old equilibrium to the new equilibrium.
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