government expenses
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Please help answer the following problem.
Assume the following open economy
C = 300 + 0.80(Y - 125)
I = 150
G = 250
X =115
M = 125+.05Y
a. Determine (solve for) the equilibrium level of income or GDP (Y).
b. Determine the impact on income of a 50 increase in government spending from 250 to 300.
c. Using the original data, compute the impact of a 50 decrease in taxes from 125 to 75.
d. If the government seeks to raise income to 3,000, how much should it raise government spending?
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This job assesses government expenses. Step by step calculations are provided.
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Problem: Assume the following open economy
C = 300 + 0.80(Y - 125)
I = 150
G = 250
X =115
M = 125+.05Y
a. Determine (solve for) the equilibrium level of income or GDP (Y).
b. Determine the impact on income of a 50 increase in government spending from 250 to 300.
c. Using the original data, compute the impact of a 50 decrease in taxes from 125 to 75.
d. If the government seeks to raise income to 3,000, how much should it raise government spending?
Solution:
The ...
Purchase this Solution
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