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What is the value of the govt surplus

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Reference no: EM132476771

I was given the following information on my assignment:

Using the information below for a four sector economy, calculate the following:

C = 500 + 0.65 Yd

T = 300 + 0.25 Y

I = 400 + 0.1 Y

G = 450 + 0.15 Y

X = 350

M = 200 + 0.2 Y

Yf = 3,572.12

Yd = Y-T

This was what I ended up getting for the equation after I solved the 4 sector model but I don't know if it's right: AE = 1500 + -194.0625Y. regardless if this is correct or not I don't know how to solve the questions.

I have to answer the following questions:

(Assume price remain constant)

Part 1: What is the value of Ye?

Part 2: What is the value of the Govt surplus(+)/deficit(-) at Ye?

Part 3: What is the size of the positive(+)/negative(-) output gap?

Part 4: What change in government spending (increase(+)/decrease(-) is required to close the gap?

Part 5: Suppose that government spending changes to G'=550 + 0.1 Y. What is the value of the new equilibrium income (Ye2)?

Using the new government spending function in Part 5, calculate the following:

Part 6: What is the size of the positive(+)/negative(-) output gap?

Part 7: Change in government spending (increase(+)/decrease(-) required to close the new gap?

Reference no: EM132476771

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