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You are given the following information for Aggregate Expenditures. Income and spending in this economy are in billions of dollars.
C = 200 + 0.8(Y + TR - T)
I = 1000
G = 700
TR = 500
T = 0.1Y
X = 900
IM = 0.12Y
1) Calculate the equilibrium level of income.
2) Calculate the value of the Current Account. Assume that unilateral transfers equal zero.
3) Suppose Government spending is reduced by $300 billion. Calculate what effect this change will have on the value of the Current Account. Assume that unilateral transfers equal zero.
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