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.
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