assignment 6 - EC 205.01 MACROECONOMICS Prof. C. Emre Alper...

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EC 205.01 MACROECONOMICS Fall 2009 Prof. C. Emre Alper “Until the lions have their historians, tales of the hunt shall always glorify the hunter.” African Proverb ASSIGNMENT SIX (Do questions 1-3 by Dec. 9, questions 4-7 by Dec. 23) 1. Consider the following dynamic model of the goods market: ( ) 1 50 0.75 100 25 150 tt CY T I G ZCI G YZ + T = +− = = = =+ + = a. Solve for equilibrium GDP, under the assumption that GDP is constant. b. Suppose that the economy is in equilibrium, and then the government spending decreases by 100 in period t. Construct a table showing what happens to consumption (C), demand (Z), and output (Y) in periods t, t+1, t+2. c. When output returns to a new value, what are the values of: (i) income? (ii) demand? (iii) consumption? d. How many periods must pass before 75% of the ultimate decrease in output has occurred? 2. Suppose that we have the following dynamic model of the goods market: ( ) 1 1 1 100 0.5 100 200 0.25 100 t t T IY G ZCIG + T = = = + = Note that both investment spending and consumption spending depend on lagged output.
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This note was uploaded on 12/27/2009 for the course ECONOMICS ec 205.1 taught by Professor Emrealper during the Spring '09 term at Boğaziçi University.

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assignment 6 - EC 205.01 MACROECONOMICS Prof. C. Emre Alper...

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