Assume that the economy is characterized by the following behavioral equations C = 160 + 0.6YD...

Question

Question

Assume that the economy is characterized by the following behavioral equations

C = 160 + 0.6YD , I = 150 , G = 150 , T = 100

a. Solve for equilibrium GDP (Y)

b. Assume full employment output is equal to 900. Is the economy in an inflationary or deflationary gap?

c. Show how fiscal policy can be used to get the economy to full employment.

Answer 1

Answer #1

Answer 2

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