a) Consider a tiny economy of Country A which currently has a total output of $400...

 

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a) Consider a tiny economy of Country A which currently has a total output of $400 million, investment of $50 million and a multiplier of 2. The equilibrium equation for Fraser Island is represented by the following: Y = 1 1-c (co + I) i. What is the aggregate demand and autonomous consumption for Country A's economy? (show your calculations). b) The rising cost of living has caused consumer confidence in Country A to fall. As a result, the government has decided to intervene before aggregate demand is affected. The government has decided to invest $100 million in Country A's infrastructure. i. What impact does this new investment have on Country A's GDP? ii. Using a properly labelled diagram, show the changes that the new investment has on Country A's economy. iii. Briefly explain the first three rounds of the adjustment process from above. a) Consider a tiny economy of Country A which currently has a total output of $400 million, investment of $50 million and a multiplier of 2. The equilibrium equation for Fraser Island is represented by the following: Y = 1 1-c (co + I) i. What is the aggregate demand and autonomous consumption for Country A's economy? (show your calculations). b) The rising cost of living has caused consumer confidence in Country A to fall. As a result, the government has decided to intervene before aggregate demand is affected. The government has decided to invest $100 million in Country A's infrastructure. i. What impact does this new investment have on Country A's GDP? ii. Using a properly labelled diagram, show the changes that the new investment has on Country A's economy. iii. Briefly explain the first three rounds of the adjustment process from above.

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Country As Economy Analysis a Aggregate Demand and Autonomous Consumption We can use the provided in... View the full answer