Условие:
Suppose that in the closed economy of Fontenegro, consumption is given by C=200+0.75(Y –Tx.
\nPlanned investment I is constant at 200, government purchases G are 160, and the government’s budget is balanced so G = T. The economy is in a short-run equilibrium and the Keynesian model can be applied.
\nWhat is the value of autonomous expenditures in this economy?
\nFind the autonomous spending multiplier of this economy. Show your work.
\nGraph aggregate planned expenditures (or aggregate demand), as a function of income, and plot the equilibrium point on the graph. Make sure to label the graph properly showing the intercept and the slope of the curve.
\nFind the equilibrium level of output, consumption, and saving in the economy.
\nSuppose elections are coming soon so the government of Fontenegro decides to spend money on a big festival. So it increases government spending to 180.
\nHowever it doesn't want to upset its citizens, so taxes remain the same.
\nFind the new government spending multiplier.
\nAdd the new aggregate planned expenditure line to you diagram, identifying the slope of the curve and autonomous spending
\nFind the new equilibrium GDP of the economy
\nAfter the elections the government realizes that it needs to increase taxes. So it increases them slightly to 170.
\nWhat would be the corresponding new level of output? Identify 2 different ways of finding the change in output after increase in taxes.
\nSuppose now that due to government expansion, demand for Money in Fontenegro goes up.\nShow the change in the money market diagram. Explain.
\nHow would the government policy effect investment in Fontenegro, if firms decides to borrow from banks?\nHow is that phenomenon called? Explain.
