Assume the following to answer the following questions:  C= 1000+ .9 (Y-T) Tax rate = 0.1Y Imports = 0.1(Y-T) Government spending = 200 Investment = 300 Exports = 600 Potential Output = $8000What is the current GDP in this economy?  Show your work.The economy described above is in the    ? gap of the AD/AS Model.By how much must government spending increase or decrease to close this gap and bring the economy to Potential Output? Show your work

The AD/AS graph illustrates an inflationary gap when the equilibrium level of real GDP is substantially to the left of potential GDP or the LRAS curve. substantially to the right of potential GDP or the LRAS curve. equal to full employment vertical

1. Use of discretionary policy to stabilize the economy Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the economy in April 2023. According to the graph, this economy is in To bring the economy back to the natural level of output, the government could use monetary or fiscal policy such as

Q1: There are two equations for macroeconomic equilibrium in an economy. State them. Show (mathematically) that Savings equals Investment when expenditure equals income. What type of economy would you have when exports equal imports? What happens to the savings-investment relationship if exports are not equal to imports? [This can be greater than or less than]. [Hint: See video lecture on Open Economy Macroeconomics]. Note: Ensure to write out full meanings when you use abbreviations or short forms. This is key to getting full marks.