MGEA06H3 Lecture Notes - Government Budget Balance, Disposable And Discretionary Income

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MGEA06H3 Full Course Notes
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MGEA06H3 Full Course Notes
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If r is held fixed at 0. 06 & e is held fixed at 0. 85 us$ per c$, then. I = 40 4. 5(0. 06 0. 06) = 40. X = 180 2(0. 85 0. 85) = 180. Im = (1/4)y + 2(0. 85 0. 85) = (1/4)y. Di = y (5/11)y + [120 (1/11)y] = 120 + (5/11)y: c = c(y): C = 120 + (5/12)y: the ae function: Ae = c + i + g + x im. Ae = [120 + (5/12)y] + 40 + 320 + 180 (1/4)y. Ae = 660 + (1/6)y: equilibrium output: Gbb = (5/11)y [120 (1/11)y] 320 = (6/11)y 440. Gbb = (6/11)(792) 440 = 8. The government runs a budget deficit of 8. Suppose government spending increases by 55, i. e. , g = 375: the new ae function: Ae = [120 + (5/12)y] + 40 + 375 + 180 (1/4)y. Ae = 715 + (1/6)y: new equilibrium output: Gbb = (5/11)y [120 (1/11)y] 375.

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