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Calculate real gdp and budget deficit

Assignment Help Macroeconomics
Reference no: EM132606506

An economy has: R = 20 + 0.25Y, C = 96 + 0.8YD, I = 15, G = 200, NX = 5 - 0.1Y.

a. Calculate real GDP and budget deficit. Show your work. Calculate the increase in indirect taxes that would be needed to balance the budget. Show your work.

b. Provide diagrams for AE and the Budget that illustrate your analysis. Do not draw NX or S diagrams.

Key:

R: Government Revenue = (Indirect Tax + Income Tax * National Income(Y))

Y: National Income (GDP)

YD: Government Budget = (Indirect Tax + Income Tax*National Income(Y) - Government Spending)

G: Government Spending

NX: Net Exports

I: Investment

Reference no: EM132606506

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