EC290 Lecture Notes - Lecture 7: Fiscal Multiplier, Canadian Dollar, Autarky

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29 Nov 2017

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The extended multiplier model in the open economy. The model presented on page 133 can be extended. C = c0 + c1 ( y t ) Find the expression for the government spending multiplier in the solution for equilibrium income. (d) Use your expression for the equilibrium level of the trade balance to make the case that the trade balance become more negative when government spending increases. The real exchange rate (from the canadian perspective) is = e p* / p (a) Use this data to ask if this measure of the exchange rate appreciated or depreciated between 2008 and 2012 and then between 2012 and 2016. The average exchange rate of the canadian dollar over december 2016 is reported by the bank of canada as 1. 3329 canadian dollars per u. s. dollar. Suppose inflation in each country continues to be 2% per year. Canadian dollar price of a us dollar (average)

Related Questions

1. In the Keynesian model, suppose that the economy has the following values : C = 100 + 0.75*(Y-T) G = 300 I = 200 NX = 0 T = 200

a) Solve for the level of equilibrium output in this economy.

b) What is the multiplier on government spending? (I want a specific number here, not a definition)

c) Household savings is defined as disposable income minus consumption (Y - T = C). What is the level of household savings in this economy?

blacklouse382

Given the following information for the Macro Economy answer the following questions.

In this economy we have an MPC equal to 0.80, Autonomous Consumption of $600 billion, Planned Investment (I) of $1,000 billion, Government Spending (G) of $1,200 billion and Net Taxes (T) of $1,000 billion.

a) Fill in the missing data for: T, Yd, C, S, and AE (in that order in a table) for every level of Y given below (all the numbers are in billions).

Income (Y) Net Taxes (T) Disposable Income (Yd) Consumption (C) Savings (S) Aggregate Expenditures (AE)
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000

b) Determine the Equilibrium level of Aggregate Income (Ye). Please state the reason for your answer.

c) Calculate the Spending Multiplier (show how you got your answer).

d) State in one sentence what your answer in (c) above tells us about any decrease in spending that takes place in the economy.

e) If this economy had a full employment level of income equal to $8,000 billion, what Macroeconomic condition is this economy experiencing.

f) Using the Spending Multiplier, determine the change in G that is needed to get this economy to be in equilibrium at full employment. Please show your work.

g) Using the Spending Multiplier, determine the change in T that is needed to get this economy to be in equilibrium at full employment. Please show your work.

cerisesnake32

1. Assume an economy with a Household Sector and a Business Sector. Household spending is given by C= 400 + 0.9Qd. Since there is no public sector, Qd = Q. Business sector spending is given as I = 1300. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Consumption Spending (C) and Household Savings.

2. Now add a Foreign Sector where Exports are X = 1000 and Imports are Im = 500 + 0.1Q. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Imports, Net Exports, Consumption Spending (C) and Household Savings.

3. Now add a public sector where Government Purchases are G = 2000, Transfer Payments are Tr = 2500 and Taxes are Tx = 500 + (1/3)Q. With the public sector Disposable Income is Qd = Q - Tx + Tr. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Imports, Net Exports, Taxes, Disposable Income, Consumption Spending (C), Household Savings and the Deficit.

Please explain what each equation represents in the answer.

sangriamammoth898

EC290 Lecture Notes - Lecture 7: Fiscal Multiplier, Canadian Dollar, Autarky

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