# ps_ch21_b - T = 0 Y = AE a) Derive and interpret the net...

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Problem Set For Chapter 21 - b The Government and The Fiscal Policy 1) Given the following for the economy of a country: (1) Consumption function : C = 85 + 0.5 Y d (2) Investment function : I = 85 (3) Government spending : G = 60 (4) Net taxes : T = – 40 + 0,25 Y (5) Disposable income : Y d Y T (6) Equilibrium : Y = C + I + G a) Solve for equilibrium income. b) How much does the government collect in net taxes when the economy is in equilibrium? c) What is government’s budget deficit or surplus? 2) Given the following model: AE = C + I + G + ( EX IM ) C = 100 + 0,8 Y I = 100 G = 60 EX = 70 IM = 50 + 0,2 Y
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Unformatted text preview: T = 0 Y = AE a) Derive and interpret the net export function. b) Derive the aggregate expenditure function. c) What is the total autonomous expenditures above? d) Solve algebraically for the equilibrium level of national income . e) Verify that multiplying the simple multiplier with the total autonomous expenditures yields the equilibrium level of national income. f) If G rise by 30, what is the change in the equilibrium level of national income? g) If EX rise by 20, what is the change in the equilibrium level of national income?...
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## This note was uploaded on 12/03/2009 for the course INDUSTRIAL IE 307 taught by Professor Arzuakyüz during the Spring '09 term at Atılım Üniversitesi.

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