You are given the following information about an economy: C = 0.90DI I = 100 G= 540
Question:
You are given the following information about an economy:
C = 0.90DI
I = 100
G= 540
(X- IM) = -40
T = -1⁄3 Y
a. Find equilibrium GDP and the budget deficit.
b. Suppose the government, unhappy with the budget deficit, decides to cut government spending by precisely the amount of the deficit you just found. What actually happens to GDP and the budget deficit, and why?
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a Y C I G X IM C 09Y T C 09Y 13Y C 0923Y C 06Y Y 06Y 100 540 40 Y 06Y 600 04Y ...View the full answer
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Related Book For
Macroeconomics Principles And Policy
ISBN: 9780324586213
11th Edition
Authors: William J. Baumol, Alan S. Blinder
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