Consider the following economy C=1000+0.4(Y-T) |=500 T=400 G=300 The current administration wants to expand the economy through fiscal policy. It chooses to change government spending (not touching taxes at all). The target income of equilibrium is 3,000. By how much should the government change spending to achieve that goal? Assume that the other components of autonomous spending remain the same. (Note that I asked change in government spending, not level. If the change is negative, you should precede your answer by a minus sign. You should figure out the new level of autonomous spending that would achieve that goal and subtract the old level of autonomous spending.)
Consider the following economy C=1000+0.4(Y-T) |=500 T=400 G=300 The current administration wants to expand the economy through fiscal policy. It chooses to change government spending (not touching taxes at all). The target income of equilibrium is 3,000. By how much should the government change spending to achieve that goal? Assume that the other components of autonomous spending remain the same. (Note that I asked change in government spending, not level. If the change is negative, you should precede your answer by a minus sign. You should figure out the new level of autonomous spending that would achieve that goal and subtract the old level of autonomous spending.)
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 1DQ
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