Tosha Collins_BU204-16_Unit 7 Assignment

# Tosha Collins_BU204-16_Unit 7 Assignment - Tosha Collins...

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Tosha Collins BU204-16 Unit 7 Assignment 6/3/10 3. A) Expansionary - due to increase in wealth, thus ΔC>0 B) Recessionary - because investments into inventories will fall ΔI<0 But actually in general it will tend to be substituted by other investments (S≈I+NX≈I+CA) or consumption. .. C) Inflationary - ΔG>0 But also depends on where government will get resources to finance it's projects. .. D) Recessionary - ΔLM<0 5. a) Y<Y* 100<160 Thus gap is recessionary = -60 ΔY=+60 MPC=0.75 Answ: ΔG = ΔY/(1-MPC) = +60/(1-0.75) = +250 ΔT = -MPC•ΔY/(1-MPC) = -0.75•60/(1-0.75) = -180 ΔTP = MPC•ΔY/(1-MPC) = 0.75•60/(1-0.75) = +180 b) Y>Y* 250>200 Thus gap is inflationary = +50 ΔY = -50 MPC = 0.5

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Answ: ΔG = ΔY/(1-MPC) = -50/(1-0.5) = -100 ΔT = -MPC•ΔY/(1-MPC) = -0.5•-50/(1-0.5) = +50 ΔTP = MPC•ΔY/(1-MPC) = 0.5•-50/(1-0.5) = -50 c) Y>Y* 180>100 Thus gap is inflationary = +80 ΔY = -80 MPC = 0.8 Answ: ΔG = ΔY/(1-MPC) = -80/(1-0.8) = -400 ΔT = -MPC•ΔY/(1-MPC) = -0.8•-80/(1-0.8) = +320
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## This note was uploaded on 06/10/2010 for the course BU 204 BU 204-16 taught by Professor Biasca during the Spring '10 term at Kaplan University.

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Tosha Collins_BU204-16_Unit 7 Assignment - Tosha Collins...

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