Please answer all sub-parts questions. Consider an open economy with following economic numbers in 2024 • Autonomous consumption = 1 • MPC = 0.6 • Planned investment = 2 • Government expenditures = 4 • Net Exports = -3 • Unemployment rate = 8% a. Suppose that Y = 10 in 2024 with the unemployment rate at 8%, much higher than policymakers, and most voters, think is appropriate. If no government action is taken, will market forces lift the economy, and lower the unemployment rate? If so, how. If not, why not? b. Suppose with Y = 15, the jobless rate falls to a much more desirable 4%. Propose a policy for 2025 that will engender a new equilibrium with the unemployment rate at 4%. c. To successfully get Y to 15, from 10, you recommended a change in one of the variables in the AE equation. What was the size of the change you suggested for that variable? Was that the same size as the change in Y? If not, explain the mechanism and show the arithmetic that predicted this different sized change Y versus your changed variable.
Please answer all sub-parts questions.
Consider an open economy with following economic numbers in 2024 • Autonomous consumption = 1 • MPC = 0.6 • Planned investment = 2 • Government expenditures = 4 • Net Exports = -3 •
a. Suppose that Y = 10 in 2024 with the unemployment rate at 8%, much higher than policymakers, and most voters, think is appropriate. If no government action is taken, will market forces lift the economy, and lower the unemployment rate? If so, how. If not, why not?
b. Suppose with Y = 15, the jobless rate falls to a much more desirable 4%. Propose a policy for 2025 that will engender a new equilibrium with the unemployment rate at 4%.
c. To successfully get Y to 15, from 10, you recommended a change in one of the variables in the AE equation. What was the size of the change you suggested for that variable? Was that the same size as the change in Y? If not, explain the mechanism and show the arithmetic that predicted this different sized change Y versus your changed variable.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
