Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of Gâ =200 and fixed taxes of Tâ =150. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function.
Câ =300â+0.80(YââT)
Suppose further that investment spending is fixed at Iâ = 200
Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S
Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of Gâ =200 and fixed taxes of Tâ =150. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function.
Câ =300â+0.80(YââT)
Suppose further that investment spending is fixed at Iâ = 200
Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S
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Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.
| C = 0.8(DI) + 1000 | C = Consumption expenditure, DI = Disposable Income |
| I = 2000 | I = Investment expenditure |
| G = 1000 | G = government expenditure |
| X = 1600 | X = spending on exports |
| M = 1800 | M = spending on imports |
| DI = Y - T | Y = real GDP, T = tax revenues/> |
| T = 1000 | |
| Yp = 12000 | Yp = Potential GDP |
Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.
| a. |
inflationary gap |
|
| b. |
recessionary gap |
|
| c. |
no output gap |
|
| d. |
government budget surplus |
|
| e. |
government budget deficit |
|
| f. |
balanced government budget |
|
| g. |
trade deficit |
|
| h. |
trade surplus |
|
| i. |
net exports of zero |
