Consider an economy where the natural rate of unemployment rate is 5% and real GDP at full employment is $3.50 billion. Consumers' spending behavior is described by the equation: C = 150 +0.75DI, while firms investment behavior is described by the equation 1 = 300+ 0.2Y - 750r. Trade is allowed and currently imports are defined by the equation IM = 250+ 0.2Y. In 2016, exports is fixed at $300 million and government spending is fixed at $800 million. Furthermore, in the same year, tax rate is 20% and the interest rate is 8%. (Question 11 of 15) Consider that in 2017, the government decides to increase government spending to $1000 million. Also consider that the government decides to pay for the increased government spending by increasing interest rate to 10% at the same time. Assume that all other spending behaviors and rates remain the same. What is the equilibrium level of GDP (in millions of dollars) in 2017? (report your answer to 2 decimal places)

Consider an economy where the natural rate of unemployment rate is 5% and real GDP at full employment is $3.50 billion. Consumers' spending behavior is described by the equation: C = 150 +0.75DI, while firms investment behavior is described by the equation 1 = 300+ 0.2Y - 750r. Trade is allowed and currently imports are defined by the equation IM = 250+ 0.2Y. In 2016, exports is fixed at $300 million and government spending is fixed at $800 million. Furthermore, in the same year, tax rate is 20% and the interest rate is 8%. (Question 11 of 15) Consider that in 2017, the government decides to increase government spending to $1000 million. Also consider that the government decides to pay for the increased government spending by increasing interest rate to 10% at the same time. Assume that all other spending behaviors and rates remain the same. What is the equilibrium level of GDP (in millions of dollars) in 2017? (report your answer to 2 decimal places)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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