ss03 - C=160 0.6(Y-100 150 1000 Z=400 0.6Y Z=Y 45 o...

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Unformatted text preview: C=160 + 0.6(Y-100) 150 1000 Z=400 + 0.6Y Z=Y 45 o University of Toronto Macroeconomics, Theory and policy Masoud Anjomshoa Economics Department Solution set #3 Disclaimer: These solutions are just guidelines for you, and may NOT include a complete solution for the questions and problems in your homework, as you must present in your assignments and/or exams. In your solutions you must show your work, and demonstrate your line of thinking clearly. Please, always check my calculations for unintentional typos or miscalculations.--------------------------------------------------------------------------------------------------------------------------------- Chapter 3. Q1. a. True b. False. Transfers are not included in G. c. False. It is between zero and one. d. True e. False. Demand = Supply=Output, where demand includes private consumption, government spending, investment, and net export. f. False. Equilibrium output increases by the multiplier factor, 1/(1-c1).------------------------------------------------------------------------------------------------------------------------------- Chapter 3. Q2- a)- Z= C+ G + I Z =160 +0.6*(Y-100) +150 +150 Z=400 + 0.6 Y Equilibrium Condition: Z = Y Line Z = Y has a slope of 45 degree. Z=400 + 0.6 Y Z= Y Y = 400 + 0.6 Y Y=1000 (point Y* in the graph) (Equilibrium Output/Income/Demand/Expenditure) b)- Equilibrium Disposable Income: Yd = Y – T Yd = 1000 – 100 = 900 c)- Equilibrium Consumption: C= 160 + 0.6 Yd = 160 + 0.6 * 900 C = 700-------------------------------------------------------------------------------------------------------------------------------...
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ss03 - C=160 0.6(Y-100 150 1000 Z=400 0.6Y Z=Y 45 o...

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