The table below shows the parameters for the economy of Hutu. C = 70 + 0.6Y...
The table below shows the parameters for the economy of Hutu. C = 70 + 0.6Y XN = 150 − 0.1Y I = 140 G = 240
The value of equilibrium income is $ 1200 .
d.if full employment income is $925, what change in government spending is necessary to move the economy to this level? Government spending needs to by $
Homework Answers
Let new Government Spending level = G`
Aggregate demand AD = C + G`+ I + NX
AD = 70+.6Y +140 + G` +150-.1Y
AD = 360+ .5Y+G`
Now at eqm, Y = AD
so, Y = 360+ .5Y + G`
.5 Y = 360 + G`
put Y = 925
.5*925 = 360 + G`
G` = 102.5
so ∆G = 102.5 - 240
= -137.5
decrease the G by 137.5
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The table below shows the parameters for the economy of Hutu. C
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