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Economics problems Assignment Set.....................




Question;1. The data in the first two columns below are for a private closed economy. Use this table to answer thefollowing questions.Real GDP Aggregate= DIexpenditures Exports(billions)(billions)(billions)$ 80120160200240280320360$100130160190220250280310$1515151515151515Imports(billions)$55555555Netexports(billions)$________________________________________Aggregateexpenditures(billions)$________________________________________a.What is the equilibrium GDP for the private closed economy? (1 point)b.Including the international trade figures for exports and imports, calculate net exports and determine theequilibrium GDP for a private open economy. (2 points)c.What will happen to equilibrium GDP if exports were $10 billion larger at each level of GDP? (2 points)d.What will happen to equilibrium GDP if exports remained at $15 billion, but imports rose to $15 billion?(2 points)e.What is the size of the multiplier in this economy? (2 points)2. Evaluate the effect of the following on the AD curve, AS curve, equilibrium price level and equilibriumoutput.(2 points each)a. The U.S. imposes tariffs on foreign goods to promote domestic industry. In retaliation, foreign countriesimpose tariffs on U.S. goods.b. Congress decides to decrease personal income taxes, and to compensate for the lost revenue they decreasebusiness subsidies.c. A technology boom improves technology across industries, improving their productivity.d. U.S. oil companies discover new large oil reserves in the U.S. The international price of oil falls.3.a.Suppose AE = 100 + 0.8Y. Draw the Keynesian cross diagram and show the equilibrium level of RGDP.Calculate the equilibrium level of RGDP. Recall that Y=AE. (4 points)b.Suppose the AE now changes to AE = 250 + 0.8Y, what is the new equilibrium value of RGDP? Showthe new AE line and the new equilibrium on the Keynesian cross diagram you drew for part a. (4 points)4. The current position of the economy is given by the following variables:Ca = 200 (autonomous consumption)G = 400T = 400I = 300X= 200M = 300MPC = 0.80Y (income) = Aggregate expenditures (C+I+G+X-M)a.Find the equilibrium level of GDP (Y*). (3 points)Now suppose that the full employment GDP = 2000b.The spending multiplier is equal to what? (1 point)c.What is the necessary change in government spending alone that is needed to get the economy to fullemployment? (2 points)d.The tax multiplier is equal to what? (1 point)e.What is the necessary change in taxes alone that is needed to get the economy to full employment? (3 points)5. The following table shows government spending and tax revenue for a hypothetical economy over a fiveyear period. All figures are in billions.YearGovernmentSpending12345$ 8008509009501000TaxRevenues$825850875900925a. In what years were there budget deficits and what were the amounts? (1 point)b. In what year was there a budget surplus and what was the amount? (1 point)c. What is the public debt in this economy over the five years? (2 points)d. If the size of the economy (GDP) was $4000 billion, what would be the public debt as a percentage of GDP?(1 point)


Paper#55470 | Written in 18-Jul-2015

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