Assume the equations of the aggregate expenditure and the related components for the economy are given...

 

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Assume the equations of the aggregate expenditure and the related components for the economy are given as follows: AE = C+1+G+ (X - M) Yd = Y -T C-S1000 + 0.8 Yd T= S100 + 0.2 Y I= $600 G = S1600 X= $200 M = $210 + 0.05 Y Where AE = planned aggregate expenditure, C = consumption expenditure, Yd = disposable income, Y = national output, T = taxation, I = investment expenditure, G = government expenditure, X exports, and M = imports. (a) Calculate the multiplier and the equilibrium level of national output (b) Calculate the government budget balance and the trade balance. (c) If the investment spending decreases from S600 to $500, how will this change affect the equilibrium level of national income? (d) If the government would like to restore the level of GDP to the previous level at (a), how much lump-sum tax should be adjusted? Assume the equations of the aggregate expenditure and the related components for the economy are given as follows: AE = C+1+G+ (X - M) Yd = Y -T C-S1000 + 0.8 Yd T= S100 + 0.2 Y I= $600 G = S1600 X= $200 M = $210 + 0.05 Y Where AE = planned aggregate expenditure, C = consumption expenditure, Yd = disposable income, Y = national output, T = taxation, I = investment expenditure, G = government expenditure, X exports, and M = imports. (a) Calculate the multiplier and the equilibrium level of national output (b) Calculate the government budget balance and the trade balance. (c) If the investment spending decreases from S600 to $500, how will this change affect the equilibrium level of national income? (d) If the government would like to restore the level of GDP to the previous level at (a), how much lump-sum tax should be adjusted?

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