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Unformatted text preview: Assume that consumption is given by C = a + b(Y-T) where T is taxes and M = d + eY. Write an expression for equilibrium GDP (Y): 3. Let Y +M = C + I + G + X Where C = 20+0.9 (Y-T), M=10 +0.4Y, and G=T=X = I= 100 a.) what is the equilibrium level of Y, and what is the balance of payments? b.) Suppose the government wants X=M. Is there a level of G that can achieve this? If so what is it? c.) Suppose the government wants X=M. Is there a level of T that can achieve this? If so what is it? Hint: To find G or T, first calculate the level of Y at which X=M. Then find the level of G or of T that would give you that level of Y....
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- Spring '10