Question: Consider the economy described by: Y = C + I + G + E - M YD = Y - T + TR C =

Consider the economy described by: Y = C + I + G + E - M YD = Y - T + TR C = 100 + 0.5*YD M = 100 + 0.175*Y T = 0.25*Y CA = E - M + TR DEF = G - T S = YD - C where TR=50; G=200; E=200; I=100. Use a spreadsheet to:

a) Compute the equilibrium level of output Y, and the corresponding levels for CA; DEF; and S

b) draw a diagram representing equilibrium between aggregate demand and supply c) Consider an increase in G, so that G*=250. Compute the new level of output Y, and the corresponding levels for CA; DEF; and S. Comment briefly on your result.

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G E I C M Y CA TR DEF T YD S 200 200 100 37109375 21484375 65625000 3515625 50 359375 1640625 54218750 17109375 200 200 100 37109375 21484375 65625000 3515625 50 359375 1640625 54218750 17109375 200 2... View full answer

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