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Homework #6

Homework #6 - Economics 101-01 Fall 2011 Homework#6 Due...

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Economics 101-01 Fall 2011 Homework #6 Due December 14, 2011 Evelyn Tavares Complete the following questions from the McConnell & Brue (GREEN) text. Chapter 31 Page 644 Question #6 Chapter 33 Pages 684-685 Question #3 Chapter 31 6. V or D = 1/Price level V= 1/1.25 V= .80 V= 1/.5 V= \$2 Price level increases, value of dollar decreases. Price level decreases, value of dollar increases. Chapter 33 3. Bond Price Interest rate % \$ 10.0 Generalization: Bond price and interest rate are inversely related Complete the following questions as well. 1. Assume a given economy has equilibrium GDP of \$600 billion. If government spending and taxes both increase by \$30 billion, determine the new equilibrium GDP. Also, solve for the balanced budget multiplier and determine whether a budget surplus, deficit, or neither arises from this change in spending and taxes. If the change in ∆G=∆ Taxes the GDP changes by the same amount GDP will increase by 30 billion, to 630 billion. BBM= 1 A balanced budget arises from this change in spending and taxes.

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