Answer to Question #12636 in Macroeconomics for Elaina

Question

The current position of the economy is given by the following variables:
Ca = 200 (autonomous consumption)
G = 400
T = 400
I = 300
X= 200
M = 300
MPC = 0.80
We Know that Y (income) = Aggregate expenditures (C+I+G+X-M)
1) Find the equilibrium level of GDP (Y*). (4 points)
2) What is the equilibrium amount of saving (S)? (2 points)
3) Write the saving function. (2 points)
4) Show that injections equal leakages. (2 points)
Now suppose that the full employment GDP = 2000
5) The autonomous spending multiplier is equal to what? (1 point)
6) What is the necessary change in government spending alone that is needed to get the
economy to full employment? (2 points)
7) The autonomous tax multiplier is equal to what? (1 point)
8) What is the necessary change in taxes alone that is needed to get the economy to full
employment? (3 points)
9) The balanced budget multiplier is equal to what? (1 point)
10) What is the necessary change in government spending and taxes that is needed to get
the economy to full employment and ke

Answer 1

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