Macroeconomy Model

Macroeconomy Model

Due Weds. March 15th at noon on Canvas. To receive full-credit you MUST show all work.

You are given the following income-expenditures model for the economy of Vulcan.

C = 300 + .9Yd

T = 50

G = 100

I = 200

a. What is the equilibrium level of income in Vulcan? Provide insight on what it means for Vulcan’s economy to be in equilibrium.

b. What would the level of expenditures be if the economy were operating at $5000? Make a forecast for the future of the Vulcan economy and explain your reasoning.

c. The policymakers of Vulcan are considering balancing the budget. What would have to change for this to occur? Using the multipliers, explain how balancing the budget would impact Vulcan’s macroeconomy? Be specific and show your work.

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