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Suppose the economy of Macroland is described by the following:
C = 200 + 0.8 DI (DI = disposable income)
I = 300 + 0.2Y − 50r (Y = GDP)
(r, the interest rate, is measured in percentage points. For example, a 9 percent interest rate is r = 9).
For this economy, assume that the Federal Reserve uses its
r = 5
G = 750
T = 0.25Y
X = 200
M = 150 + 0.2Y
Hint: DI = Y − T
a. |
75 surplus
|
|
b. |
475 surplus
|
|
c. |
475 deficit
|
|
d. |
75 deficit
|
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