You are given the following model that describes the economy of Hypothetica. Consumption function: C = 100+ 0.8Yd Planne

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You Are Given The Following Model That Describes The Economy Of Hypothetica Consumption Function C 100 0 8yd Planne 1 (79.28 KiB) Viewed 13 times

You Are Given The Following Model That Describes The Economy Of Hypothetica Consumption Function C 100 0 8yd Planne 2 (58.91 KiB) Viewed 13 times

You are given the following model that describes the economy of Hypothetica. Consumption function: C = 100+ 0.8Yd Planned investment = $30 Government spending G = $75 Exports EX = $25 Imports IM = 0.05Yd Disposable income. Yd = Y-T Taxes: T = $40 Planned aggregate expenditure: AE =C+I+G+ EX-IM Definition of equilibrium income: Y = AE Equilibrium income in Hypothetica is $800 (Enter your response as a whole number.) At the equilibrium level of income found above, the current account balance is $-13 and the government deficit is $35 (Enter your responses as integers and include a minus sign if necessary) If government spending in Hypothetica increases to $80, equilibrium income will increase by $20 (Enter your response as a whole number) If government spending in Hypothetica increases to $80, imports will Suppose the amount of imports is limited to IM = $40 by a quota on imports. If government spending is again increased from $75 to $80, equilibrium income will increase by $20 because
If government spending is again increased from $75 to $80, equilibrium income will increase by $20 because O A. there is no marginal propensity to save and the multiplier rises. OB. there is no marginal propensity to consume and the multiplier rises. OC. there is no marginal propensity to import and the multiplier falls. OD. there is no marginal propensity to import and the multiplier rises. Now suppose Hypothetica does not limit imports and government spending is back at $75. If exports are fixed at EX=$25, income must be $ to ensure a current account balance of zero (Hint Imports depend on income, so what must income be for imports to be equal to exports?) Government must cut spending by $ to balance the current account. (Hint Use your answer to the first part of this question to determine how much of a decrease in income is needed. Then use the multiplier to calculate the decrease in G needed to reduce income by that amount.)