Economics 100B
Professor K. Kletzer
UCSC
Fall 2008
Problem Set 1
Due at the beginning of lecture, Wednesday, October 8
1.
Suppose that the following behavioral equations characterize an economy (quantities are in billions of
dollars):
C = 2000 + 0.9 Y
d
I
= 1800
G = 1800
T = (1/3) Y
(a) Solve for equilibrium real GDP, Y.
(b) Solve for equilibrium disposable income, Y
d
.
(c) Solve for consumption expenditures.
2.
Calculate the multiplier for the economy of problem 1.
(a) What is the predicted increase in real GDP for an increase in government expenditures of $100 billion?
(b) How much do taxes rise with this increase in real GDP?
(c) What is the net change in the government deficit (GT)?
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 Spring '07
 YiSun
 Economics, Macroeconomics, Algebra, Public Finance, gross domestic product

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