Consider the following equations that describe an open economy with government, where governmenttransfers equal $0.C = 320 + 0.6YDI = 936Budget Balance0.2Y - 534NX = 712-0.08YPart a: Determine the equilibrium level of GDP.Part b: Suppose potential GDP is 4,000 (Y*). Determine the value of G2 if the goal is to stabilize theeconomy by restoring equilibrium GDP to its potential level. Verify that you have the correct value for G2by solving for the equilibrium GDP.Part c: How has the magnitude of the multiplier and the AE curve changed because of the changes togovernment spending? Use 2 to 3 sentences to provide an explanation that supports your answer.Part d: Government spending returns to Gị and the government wants to achieve potential GDP byaltering the tax rate (t). Determine the value of t2 that will restore Y = Y*. Verify that you have the correctvalue for t2 by solving for the equilibrium GDP.Part e: How has the magnitude of the multiplier and the AE curve changed because of changes to the taxrate? Use 2 to 3 sentences to provide an explanation that supports your answer.

following equations that describe an open economy with government, where governmer ual $0. C = 320 + 0.6Yp I = 936 %3D Budget Balance = = 0.2Y - 534 NX = 712-0.08Y %3D rmine the equilibrium level of GDP. pose potential GDP is 4,000 (Y*). Determine the value of G2 if the goal is to stabilize the - restoring equilibrium GDP to its potential level. Verify that you have the correct value for G or the equilibrium GDP. has the magnitude of the multiplier and the AE curve changed because of the changes to E spending? Use 2 to 3 sentences to provide an explanation that supports your answer. ernment spending returns to G¡ and the government wants to achieve potential GDP by tax rate (t). Determine the value of t2 that will restore Y = Y*. Verify that you have the correc by solving for the equilibrium GDP. has the magnitude of the multiplier and the AE curve changed because of changes to the ta to 3 sentences to provide an explanation that supports your answer.

following equations that describe an open economy with government, where governmer ual $0. C = 320 + 0.6Yp I = 936 %3D Budget Balance = = 0.2Y - 534 NX = 712-0.08Y %3D rmine the equilibrium level of GDP. pose potential GDP is 4,000 (Y). Determine the value of G2 if the goal is to stabilize the - restoring equilibrium GDP to its potential level. Verify that you have the correct value for G or the equilibrium GDP. has the magnitude of the multiplier and the AE curve changed because of the changes to E spending? Use 2 to 3 sentences to provide an explanation that supports your answer. ernment spending returns to G¡ and the government wants to achieve potential GDP by tax rate (t). Determine the value of t2 that will restore Y = Y. Verify that you have the correc by solving for the equilibrium GDP. has the magnitude of the multiplier and the AE curve changed because of changes to the ta to 3 sentences to provide an explanation that supports your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the MPC equals 0.5, and real GDP is $14 trillion with potential real GDP $14.5 trillion, how much would governmentpurchases would need to increase by to restore the economy to potential real GDP?
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