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100b08ps1 - Economics 100B UCSC Professor K Kletzer Fall...

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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 (G-T)?
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