The people in Stataland spend 95% of their income and need basic consumption of 1000 to survive. Investment is 500 and government expenditures are 300. The budget deficit is 100.
1. What is the consumption function?
2. Set-up the model and find the Equilibrium GDP?
3. What is the consumption level at equilibrium?
4. What is the Actual Budget Deficit?
5. If Full Employment GDP is 35000, how much should the government change taxes T to get to it?
6. What happens to the budget deficit in this case?
7. From the original equilibrium if the government were to change Government expenditures G instead of taxes to reach F.E. GDP, how much should G change, and what happens to the Budget deficit in this case?
8. Which case here is better for the budget deficit?
The people in Stataland spend 95% of their income and need basic consumption of 1000 to survive. Investment is 500 and government expenditures are 300. The budget deficit is 100.
1. What is the consumption function?
2. Set-up the model and find the Equilibrium GDP?
3. What is the consumption level at equilibrium?
4. What is the Actual Budget Deficit?
5. If Full Employment GDP is 35000, how much should the government change taxes T to get to it?
6. What happens to the budget deficit in this case?
7. From the original equilibrium if the government were to change Government expenditures G instead of taxes to reach F.E. GDP, how much should G change, and what happens to the Budget deficit in this case?
8. Which case here is better for the budget deficit?
