Question #996

Is it true of false? why?
& If the real interest rate on government debt is equal to the growth rate of real GDP, reductions in the debt-to-GDP ration require the governmnet to run primary budget surpluses.&
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& You are given the following expenditure functions.&
Consumption, c=30+0.9DI&
Investment, I=40&
Government, G=20&
Taxes, T=0.2Y&
Exports, X=20&
Imports, IM=0.12Y&
& Assume the aggregate price level remains constant.&
a. what is the equation of the aggregate expenditure function?plot it in a diagram.
what is the total autonomous expenditure in the economy?&
& b.what is the slope of the AE function?how does the slope change when
1. MPC changes
2. the tax rate changes
3. marginal propensity to import changes&
& c. calculate the equilibrium level of real national income&
d. what is the multiplier? &
e. suppose that the government decides to increase G by 10. What will be the effect of this on equilibrium national income?

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