- Consider the Egyptos (a hypothetical economy) economy: C = 100 + 0.8Yd Note that Yd = Y – T
I = 120 G = 160 T = 100
- Calculate the equilibrium value of Y. Show your work and provide graphical illustration.
- Assume YF (full employment level of Y) = $1700. How much change in T should the government make to move the economy to full employment (i.e., to YF)? Provide numerical and graphical answers (use the graph in part A). Show your work.
- Consider the following Greekos economy (a hypothetical economy): C = 100 + 0.75Yd
I = 60 G = 140 T = 0.2Y (Note that Yd = Y – T)
- Calculate the equilibrium value of Y. Show your work and provide graphical illustration.
- Does the government run a budget surplus, deficit, or a balanced budget in equilibrium? provide numerical answers. (Note that Government Budget = T – G)
- Demonstrate that in equilibrium, the sum of injections = sum of leakages. Provide numerical answers.
- Assume YF (full employment level of Y) = $ 600. How much change in G should the Greekos government make to move the economy to full employment (i.e., to YF)? Provide numerical and graphical answers (use the graph in part A).
- What is the effect of the above Greekos government policy on the government budget? Provide numerical answers.
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