Problem Set 13 (ECO100) - Prof. Gustavo Indart Department...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Prof. Gustavo Indart Department of Economics University of Toronto ECO 100Y INTRODUCTION TO ECONOMICS Problem Set 13 1. Consider the Aggregate Expenditure model of the economy with a linear aggregate expenditure (AE) curve. a) Measuring aggregate expenditure (AE) on the vertical axis and real GDP (Y) on the horizontal axis, plot an AE curve that cuts the 45 E line at 200, and is 380 at GDP equal to 400. b) Calculate algebraically the slope and the vertical intercept of the expenditure curve. c) If potential GDP is 400, is there an inflationary or recessionary gap? What is the size of this inflationary or recessionary gap? d) If the government wants to close this gap, should increase or decrease its purchases of goods and services (G)? By how much should increase or decrease G? 2. Given Savings (S) as a function of Disposable Income (YD) such that autonomous savings are negative and equal to -$10 billion and savings are $70 billion when disposable income is $400 billion.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/10/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Summer '09 term at University of Toronto- Toronto.

Page1 / 2

Problem Set 13 (ECO100) - Prof. Gustavo Indart Department...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online