5 of 27 (14 complete) Hw Score: 43.83%, 11.83 of 27 pts core: 0 of 1 pt ext Prob

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5 of 27 (14 complete) Hw Score: 43.83%, 11.83 of 27 pts core: 0 of 1 pt ext Problem 1.3c Assume that in 2015, the following prevails in the Republic of Nurd: EQuestion Help Govemment spending (G)-$0 Net taxes (T) $0 Planned investment (1)- $25 husumo hat households of Nund coum they saxve percent of their income, they save 20 percent of their income. In other words, their MPC- 0.80 and MPS 0.20. Thus the consumption function and saving function of Nurd are: C 0.80Y and S o.20Y, where disposable income Yo -Y-T Currently, the economy of Nurd is in equilibrium. As the leading econometrician of Nurd, you have essimated the $200. i spending, if any, to achieve full employment in Nurd i nclude a minus sign ? necessary) G(Round your response to one decimal place and inolude a minus sign i nacessary) AG S(Round your response to one decimal place and inolude a minus le Enter your answer in the answer box and then click Check Answer

Explanation / Answer

The equilibrium condition :

Y = C + I + G

Y = 0.8( Y - T) + 25 + G

Now we have to find the level of G at which Y = 200, so put Y = 200 in the equilibrium condition.

Y = C + I + G

200 = 0.8(200 - 0) + 25 + G

200 = 160 + 25 + G

200 = 185 + G

G = $15.

So change in G is $15 from $0.

Change in G = $15.

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