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Unformatted text preview: RES-em E ‘XQ-é’ 7%, An Benavie October 11, 1995
Econ. 130 Mid—Semester Exam Assume the government is reducing the deficit by autonomously increasing taxes, cutting entitlements and reducing goyernment purchases; specifically, assume that AFB = ~ 40 and'u—‘l: = 50. In addition,
assume tat. AYD_"AY"' ,AY—.,an AY=20‘ Given this information, compute the following: A 9.9 "AY '
B A? ‘ AY C. The value of the multiplier D. The equilibrium AY E. The total equilibrium: AC, ALAN, AS, AYD, AT and
ADeficit. F. Graph this problem, showing the goods market, the deﬁcit and employment. Include the following on your graphs, along with
the magnitudes you have computed: AE, equilibrium AY, equilibrium AN, the structural (autonomougLnDeficit, the cyclical (automatic) ADeficit, the total equilibrium ADeficit. """—-—._..-- ' R 66'2de October 21, 1994 ECON 130
(Show all Work) Assume: ﬂ = .L, A6 = -330, A'l‘ = +350, and A? = -4.
AY 20 Compute:
1 AB ,
' AY W'— 4
2. The multiplier = W
3 AE =- _______+____.___ 4. Equilibrium AY = W A11: Benavie 5. Total equilibrium v
A3 = AN= A Deﬁcit = AM= Assuming the initial equilibrium Y and r is (1000, 8%). Show the impact of the above autonomous changes in G , T and i7 on the IS and LM schedules. Show graphically the
magnitude of the shifts in these curves along with the initial and ﬁnal equilibrium Y and
r. Also, show how the economy moves through time from one equilibrium (Y, r) to the other. " ...
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