Answer Happy

Let the Canadian economy be described below. You are an economist in the Department of Finance, Ottawa. C=55 +0.8Yd (Yd is disposable income) 1 = 300 (Investment spending) G = 140 (Government purchases) (Net taxes) NT = 0.1Y X = 205 (Exports are constant) IM = 0.22Y (Imports depend positively on our own Y)
g) Suppose the government wants to push the economy back to the Y level in (a) but with the investment spending still at 1-100 Find the new necessary G-D h) Also find new BB with the government spending in (g) and the investment spending=100 88-0 1) Without further calculations, use the AD-AS diagram to demonstrate the effect of the governments action in (a). Be sure to include the initial drop in investment spending from (d) in your diagram Original Equilibrium (Point) 135 120 105 90 1200 1000 Real GDP Price level 75 60 45 30 15 Reset 400 800