Asssignment #3

7.a
Y=C+I+G+NX
Y=50+0.85Yd+150+300+[80-1(10+0.05Y)]
Y=50+0.85+(Y-400)+150+300+80-10+0.05Y
Y=50+0.85Y-340+150+300+80-80-0.05Y
Y=230+0.85Y-0.05Y

Y-0.80Y=230
0.2Y=230
Y=230
0.2
Y=1150

C=50+0.85(Y-T)
C=50+0.85(1150-400)
C=50+0.85(750)
C=50+637.5
C=687.5

IM=10+0.05Y
=10+0.05(1150)
=10+57.5

=67.5

b.Y*=C*+I*+G*+EX*-IM*)
1150=687.5+150+300+(80-67.5)
1150=1150

d.y= 1
G

1-0.85

1150= 1
G

0.15

1150 = 6.67
G

G(6.67)-1150
G=1150
6.67
G=172.41
Y = 1150
G

172.41

e.Yes it is a surplus because the change in government budget is 172.41 it is in surplus by 300172.41=127.59
f.

Y=C+I+G+NX
50+0.85Yd+150+500+[80-(10+0.05Y)]
50+0.85(Y-400)+150+500+5080-10-0.05Y

50+0.85Y-340+150+500+80-10-0.05Y
430+0.85Y-0.05Y
430+0.80Y
Y-0.80Y=430
0.20Y=430
Y=430/0.20
2150

6B
PY=[200=O.75Y-75+100+100
PY=200+0.75Y-75+100+100
PY=0.75Y+325
Therefore Y =0.75Y+375
Y-0.75Y=325
Y=1300

6c.
PY=[200+0.75(y-100)]+100+125
PY=200+0.75Y-75+100+125
PY=0.75Y+350
Since Y=PY
Therefore Y=0.75Y+350

Y-0.75Y=350
0.25Y=350
Y=1400
6d.
1600=[200+0.75(Y-100)]+100+G
1600=200+0.75(1600-100)]+100+G
1600=200+1200-75+100+G
1600=`1425+G
1600-1425=G
175=G
Government purchases need to increase to be increase to 175 to achieve an income of 1600.

Intermediate Macroeconomics

Lionel Morant 0805330

Keitho Spencer 0416391
Jermaine Laing 0704974
Kimesha Scarlette 0706020

Teacher: Terry-Ann Gaynor-Clarke

Group: BBA3 (Fin F)
Date: November 11, 2010