Global and domestic macroeconomics

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Global and Domestic Macroeconomics

Problem 1. We know the following about a country called Fribonia: Co=10,000 C1=0.8 T=10,000 Tr=2,500 G=7,500 I=5,000 QUESTIONS: (a) Formulate the corresponding macroeconomic model identifying each of its equations. (b) Show that the equilibrium output level is 82,500 (c) What would happen with the economy of this country if Government spending increases in 3,000 units? (d) If all the workers in the economy are working when output is 100,000, what would have been the adequate increase in government spending to get output move to full employment level. What other things could the government have done? (e) What other fiscal policy tools could the Government use to attain its goal of full employment? Do all these policies affect all economic agents equally?

Reference no: EM131169615

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