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Unformatted text preview: 1991 and 2001. Explain. 9. What actions has the Fed been taking leading up to the current economic crisis? Discuss these actions since 2004. 10. Back to the Model, with crowding out: C = 200 + .9 (PDI) PDI = Y – Tx Tx = 300 G = 300 I = 800 – 10,000 (.03) (X – M) = 0 a. What is equilibrium income in the economy? What is the government budget? b. Now, the government tries to end a recession with a fiscal stimulus increase of 300, and to get this they borrow money by issuing bonds that increases the interest rate to 6% (.06). What is the new equilibrium income? What is the government budget? c. Explain what happened in this example. 11. During this current recession, the Federal Government has been able to borrow money at a very low rate. What is this about?...
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