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 = $8000 By how much must government spending increase or decrease to close this gap and bring the economy to Potential Output?

24.

Explain fiscal policy and give examples on how that could be applied to the current COVID economics situation in the United States.

Consider the following equations that describe an open economy with government, where government transfers equal $0. C = 320 + 0.6YD I = 936 Budget Balance 0.2Y - 534 NX = 712-0.08Y Part a: Determine the equilibrium level of GDP. Part b: Suppose potential GDP is 4,000 (Y*). Determine the value of G2 if the goal is to stabilize the economy by restoring equilibrium GDP to its potential level. Verify that you have the correct value for G2 by solving for the equilibrium GDP. Part c: How has the magnitude of the multiplier and the AE curve changed because of the changes to government spending? Use 2 to 3 sentences to provide an explanation that supports your answer. Part d: Government spending returns to Gị and the government wants to achieve potential GDP by altering the tax rate (t). Determine the value of t2 that will restore Y = Y*. Verify that you have the correct value for t2 by solving for the equilibrium GDP. Part e: How has the magnitude of the multiplier and the AE curve changed…