The equilibrium GDP , the budget surplus or deficit and the trade surplus or deficit.

Question

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Answer 1

Question

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

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Answer 2

Question

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

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Answer 3

Question

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

Answer 6

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

Answer 7

Chapter 20, Problem 3TY

a)

To determine

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

Answer 8

a)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,240 and it has been found that the budget as well as the trade is deficit.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=300IM=250+0.2YG=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+{300−{250+0.2Y}}

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+{300−{250+0.2Y}} =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+{300−{250+0.2Y}} =(150+300+800+300−4−250+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+300−4−250+0.6Y) =(1,296+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,296Y(1−0.6)=1,296 0.4Y=1,296 Y=1,2960.4 =3,240

Thus the equilibrium level of GDP has been derived as 3,240 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3240−800 =−152

Since it is negative value at −152 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=300−(250+0.2Y) =300−(250+0.2×3240) =−598

Since it is a negative value at −598 , it could be concluded that the country is facing a trade deficit.

Answer 13

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

Answer 14

b)

To determine

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

Answer 15

b)

Expert Solution

Answer to Problem 3TY

The equilibrium GDP has been derived as 3,740 and it has been found that the budget as well as the trade is deficit.

Answer 16

b)

Expert Solution

Answer 17

b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.

The GDP is calculated as follows:

Y=C+I+G+NX ……………………….. Eq (1)

Where Y is the output level, C the consumption, I the investment, G the Governmental expenditure and NX is the net export. It is given that:

C=150+0.75DII=300+0.2Y−50rX=250G=800

T=0.20Yr=0.08Y

By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:

Y=C+I+G+NX

Y=(150+0.75DI)+(300+0.2Y−50r)+800+(250−0.2Y)

As the rate of interest is 8 percent and DI is the difference between income and tax, the above equation can be modified as:

Y=(150+0.75(Y−T))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75(Y−0.20))+(300+0.2Y−50(0.08))+800+(250−0.2Y) =(150+0.75Y−0.15Y))+(300+0.2Y−4))+800+(250−0.2Y)) =(150+300+800+250−4+0.75Y−0.15Y−0.2Y+0.2Y) =(150+300+800+250−4+0.6Y) =(1,496+0.6Y)

Simplifying further by bringing the variable on to the left hand side:

Y−0.6Y=1,496Y(1−0.6)=1,496 0.4Y=1,496 Y=1,4960.4 =3,740

Thus the equilibrium level of GDP has been derived as 3,740 .

When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:

Surplus Budget =(T−G)>0

Deficit Budget =(T−G)<0

Wherein G is the Governmental expenses and T is the tax collected. Substituting T=0.20Y and G=800 in the above equation in order to determine as to whether the budget is surplus or deficit:

T−G=0.20(Y)−800 =0.20×3740−800 =−52

Since it is negative value at −52 , the Governmental expenditures is exceeding the revenue from tax, and hence it could be concluded that it is a deficit budget.

When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:

NX=(250−0.2Y) =(250−0.2×3740) =−498

Since it is a negative value at −498 , it could be concluded that the country is facing a trade deficit.

Answer 20

Ch. 20 - Prob. 1TY Ch. 20 - Prob. 2TY Ch. 20 - Prob. 3TY Ch. 20 - Prob. 1DQ Ch. 20 - Prob. 2DQ Ch. 20 - Prob. 3DQ Ch. 20 - Prob. 4DQ Ch. 20 - Prob. 5DQ Ch. 20 - Prob. 6DQ Ch. 20 - Prob. 7DQ

The equilibrium GDP , the budget surplus or deficit and the trade surplus or deficit.

To compute: The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit.

Answer to Problem 3TY

Explanation of Solution

The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.

Answer to Problem 3TY

Explanation of Solution

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