Answer Happy

ECONOMIC ANALYSIS 2 - Homework 3 The due date for the homework is June 7, 2022 at 19.00 pm. 1) Let us assume a small country with total GNP of 100 units in 2016 (such a number is not realistic for GNP but I have chosen it for ease of calculation). This country's GNP grows each year by 10%. The MPC of that country is 0.75 which remains constant between the years of 2016 and 2020. Given this information; a) Calculate the GNP of that country for the years 2017, 2018,2019 and 2020 (10 pts) b) Find the gap between GNP (aggregate supply) and C (consumption) for the years 2017,2018,2019 and 2020. (20 pts) c) Assuming that G (government expenditures) stay at a constant value of 10 in all the years between 2016 and 2020; find the amount of investment which is required to make aggregate demand equal to GNP (aggregate supply) in years 2017,2018,2019 and 2020. (20 pts) 2) In the question above; let us assume that the investments in the year 2020 is 15 units. What must be the level of G (government expenditures) in 2020 to make the aggregate demand equal to aggregate supply (GNP) in 2020? (30 pts) Hint: You must consider multiplier in this question 3) In a few clear sentences; explain what liquidity trap is and under what conditions liquidity trap occurs? (20 pts.) Note: You may use two decimals (e.g. 130.25) in your answers