MGTA01H3 Study Guide - Government Budget Balance, Government Spending, Money Supply
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MGTA01H3 Full Course Notes
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Mgea06 tutorial #9 (revised: question 1 (based on midterm question winter 2012) The economy in question is an open economy that faces fixed prices. In addition, the economy can be described by the income-expenditure model and the following set of equations: where yd = disposable income. Note: 1) unless otherwise stated, r is held constant at 0. 06 (6%). 2) keep your answers to 2 decimal points if necessary: what is the equilibrium level of output, find the government budget balance. The economy is initially in its long-run equilibrium as shown in part (a). Now, a wave of pessimism sweeps the country such that firms become more pessimistic about the future. Find the change in cyclical budget balance as a result of this change in business confidence. This problem deals with a very simple and very small banking system in which there is only one.
