The following values represent country A C=$160, S=$40, T=$0, Y=$200 and I=$30, T=0 and G=0 The households consume 80 percent of their income, and save 20 %. MPC = 0.8 and MPS = 0.2. That is, C = 0.8Yd and S = 0.2Yd. a) Is the economy of country A in equilibrium? What is the equilibrium level of income? b) If the full employment level of Y is supposed to be $250, what fiscal policy should the government follow?
The following values represent country A C=$160, S=$40, T=$0, Y=$200 and I=$30, T=0 and G=0 The households consume 80 percent of their income, and save 20 %. MPC = 0.8 and MPS = 0.2. That is, C = 0.8Yd and S = 0.2Yd. a) Is the economy of country A in equilibrium? What is the equilibrium level of income? b) If the full employment level of Y is supposed to be $250, what fiscal policy should the government follow?
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
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The following values represent country A
C=$160, S=$40, T=$0, Y=$200 and I=$30,
T=0 and G=0
The households consume 80 percent of their income, and save 20 %.
MPC = 0.8 and MPS = 0.2.
That is, C = 0.8Yd and S = 0.2Yd.
a) Is the economy of country A in equilibrium? What is the equilibrium level of income?
b) If the full employment level of Y is supposed to be $250, what fiscal policy should the government follow?
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