problem 9.doc

# problem 9.doc - ECON 162-A1 A2 Fall 2017 Kenny Christianson...

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ECON 162-A1, A2 Kenny Christianson Fall 2017 due: December 1 PROBLEM SET NUMBER NINE 1. Suppose you are given the following fixed-price Keynesian model: C = 480 + 0.9Y d I = 200 G = 100 X = 200 M = 100 + 0.1Y d T = 100 a. Find the aggregate expenditure function. b. Find the equilibrium level of real GDP. c. What is the spending multiplier in this model? Tax multiplier? d. Show that leakages = injections at equilibrium. e. If taxes increase by \$100, what is the new equilibrium level of GDP? f. Show your answers to b) and f) graphically. 2. Go to the following link to read Franklin Roosevelt’s fireside chat of April 14, 1938: After reading the chat, answer the following questions: arguments made in paragraphs 9-14. (“ I then said this to the Congress:….) remedies listed in paragraphs 25-39. ( "How and where can and should the Government help to start an upward spiral?"…)

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