Suppose an economy has constant prices, interest rates, and exchange rates. The economy has following functions:T= 0.25Y

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Suppose an economy has constant prices, interest rates, and exchange rates. The economy has following functions:T= 0.25Y+ 500X = 400G = 1,5001 = 500C = 0.8Yd+ 1,000 M = 0.1Y+ 1,000a. Calculate equilibrium income. Government budget surplus or deficit?b. Use the multiplier to recalculate equilibrium income when government spendingincreases by 100. Any comments on the government budget? c. To achieve equilibrium income as in b, but not by increasing government spending but byreducing autonomous taxes, by how much must net tax is reduced.d. Starting from a situation like a, if the government simultaneously increases public spending and increases taxes by the same amount of 100, what is the equilibrium income?e. Of the types of fiscal policy mentioned above, which one do you favor? Why?
Suppose an economy has constant prices, interest rates, and exchange rates. The economy has following functions:T= 0.25Y+ 500X = 400G = 1,5001 = 500C = 0.8Yd+ 1,000 M = 0.1Y+ 1,000a. Calculate equilibrium income. Government budget surplus or deficit?b. Use the multiplier to recalculate equilibrium income when government spendingincreases by 100. Any comments on the government budget? c. To achieve equilibrium income as in b, but not by increasing government spending but byreducing autonomous taxes, by how much must net tax is reduced.d. Starting from a situation like a, if the government simultaneously increases public spending and increases taxes by the same amount of 100, what is the equilibrium income?e. Of the types of fiscal policy mentioned above, which one do you favor? Why?
Suppose an economy has constant prices, interest rates, and exchange rates. The economy has following functions:
T= 0.25Y+ 500
X = 400
G = 1,500
1 = 500
C = 0.8Yd+ 1,000
M = 0.1Y+ 1,000
a. Calculate equilibrium income. Government budget surplus or deficit?
b. Use the multiplier to recalculate equilibrium income when government spending
increases by 100. Any comments on the government budget? c. To achieve equilibrium income as in b, but not by increasing government spending but by
reducing autonomous taxes, by how much must net tax is reduced.
d. Starting from a situation like a, if the government simultaneously increases public spending and increases taxes by the same amount of 100, what is the equilibrium income?
e. Of the types of fiscal policy mentioned above, which one do you favor? Why?