# Nurd’s Equilibrium Assignment | Homework For You

Assume that in 2011, the following prevails in the Republicof Nurd: Y = \$200 G = \$0C = \$160 T = \$0S = \$40I (planned) = \$30 Assume that households consume 80 percent of their income,they save 20 percent of their income, MPC = .8, and MPS = .2.That is, C = .8Yd and S = .2Yd.

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a. Is the economy of Nurd in equilibrium? What is Nurd’sequilibrium level of income? What is likely to happen in thecoming months if the government takes no action?

b. If \$200 is the “full-employment” level of Y, what fiscal policymight the government follow if its goal is full employment?

c. If the full-employment level of Y is \$250, what fiscal policymight the government follow?

d. Suppose Y = \$200, C = \$160, S = \$40, and I = \$40. Is Nurd’seconomy in equilibrium?

e. Starting with the situation in part d, suppose the governmentstarts spending \$30 each year with no taxation and continues to spend \$30 every period. If I remains constant,what will happen to the equilibrium level of Nurd’s domestic product (Y)? What will the new levels of C and S be?

f. Starting with the situation in part d, suppose the government starts taxing the population \$30 each year without spending anything and continues to tax at that rate every period. If I remains constant, what will happen to the equilibrium level of Nurd’s domestic product (Y)? What will bethe new levels of C and S? How does your answer to part fdiffer from your answer to part e? Why? Get Economics homework help today

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