Problem_Set_3_2009

# Problem_Set_3_2009 - T = 0.5Y a. Draw a graph to show how Y...

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Problem Set 3 Professor Sheffrin Macroeconomics 1B, Fall 2009 Chapter 9 Problems 1. a. The economy is at full employment and there is a sharp rise in oil prices. Using the aggregate demand and supply framework, show the effects on prices and output in the short run and in the long run. b. Suppose the economy is at full employment and there is a tax increase. Using the aggregate demand and supply framework, show the effects on prices and output in the short run and long run. 2. Do Problems (Edition 6: 3.6, 3.8, 3.9) (Edition 5: 3.7, 3.8, 3.9 ) Chapter 10 3. Do Problem 1.6 and 2.5 (both editions) 4. Look at the Congressional Budget Office’s Long Term Outlook at http://www.cbo.gov/ftpdocs/102xx/doc10297/06-25-LTBO.pdf Read Box 1.3 and write one paragraph about it. Chapter 11 5. Consider the following economy: C = 5 + 0.8(Y-T) I = 15 G = 130

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Unformatted text preview: T = 0.5Y a. Draw a graph to show how Y is determined. What is the value of the intercept of the demand line? What is its slope? b. Calculate the value of equilibrium output, taxes, and the government deficit, which is G-T. c. Suppose I increases by 10. How much does GDP increase? d. Starting from the original equilibrium, what happens to the deficit when I increases by 10? e. Starting from the original equilibrium, what happens to the deficit when G increases by 10? 6. Explain how the following affect the fiscal multiplier. a. an increase in tax rates b. an increase in the marginal propensity to import c. a decrease in the marginal propensity to save d. having investment spending also depend on income (e.g. I = I + dY, where d is positive) 7. Do problem 3.6 and 3.7 and problem 5.6 (both editions)....
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## This note was uploaded on 09/25/2011 for the course ECN 001B taught by Professor Staff during the Fall '09 term at UC Davis.

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Problem_Set_3_2009 - T = 0.5Y a. Draw a graph to show how Y...

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