Consider an economy located near the Indian Ocean where the main industries are agriculture and tourism. Policymakers and economic advisors have determined that consumers' spending behavior is described by the equation: C = 255 +0.75DI while the domestic investment spending behavior by firms is fixed at $250 billion. Currently, the population is 250 million, the labor force participation rate is 68 percent, and the unemployment rate is 4 percent. The policymakers and economic advisors have also determined that the short run aggregate supply of goods and services in the economy is described by the equation Y = Ypot + 75(P-Pe), while the potential level of real GDP is $2075 billion and the expected price level at full employment, Pe, is 115. Net taxes is described by the equation: T = 120 +0.2Y while the government spending is fixed at $500 billion. Trading occurs mostly with neighboring economies and currently total imports is $300 billion while total exports is $200 billion. (Question 8 of 9) Now consider that in the following year, given the economy's outcome from before and following recommendations from the economic advisory board, the government increases their funding of student grants by $80 billion. At the same time, the overall population increased by 100 million people. Given the changes in the economy, what is the government's current budget balance (billions of dollars)? (report your answer at 2 decimal places)
Consider an economy located near the Indian Ocean where the main industries are agriculture and tourism. Policymakers and economic advisors have determined that consumers' spending behavior is described by the equation: C = 255 +0.75DI while the domestic investment spending behavior by firms is fixed at $250 billion. Currently, the population is 250 million, the labor force participation rate is 68 percent, and the unemployment rate is 4 percent. The policymakers and economic advisors have also determined that the short run aggregate supply of goods and services in the economy is described by the equation Y = Ypot + 75(P-Pe), while the potential level of real GDP is $2075 billion and the expected price level at full employment, Pe, is 115. Net taxes is described by the equation: T = 120 +0.2Y while the government spending is fixed at $500 billion. Trading occurs mostly with neighboring economies and currently total imports is $300 billion while total exports is $200 billion. (Question 8 of 9) Now consider that in the following year, given the economy's outcome from before and following recommendations from the economic advisory board, the government increases their funding of student grants by $80 billion. At the same time, the overall population increased by 100 million people. Given the changes in the economy, what is the government's current budget balance (billions of dollars)? (report your answer at 2 decimal places)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider an economy located near the Indian Ocean where the main industries are agriculture and tourism. Policymakers and economic
advisors have determined that consumers' spending behavior is described by the equation: C = 255 + 0.75DI while the domestic investment
spending behavior by firms is fixed at $250 billion. Currently, the population is 250 million, the labor force participation rate is 68 percent, and the
unemployment rate is 4 percent. The policymakers and economic advisors have also determined that the short run aggregate supply of goods
and services in the economy is described by the equation Y = Ypot + 75(P - Pe), while the potential level of real GDP is $2075 billion and the
expected price level at full employment, Pe, is 115. Net taxes is described by the equation: T = 120 + 0.2Y while the government spending is
fixed at $500 billion. Trading occurs mostly with neighboring economies and currently total imports is $300 billion while total exports is $200
billion.
(Question 7 of 9)
Now consider that in the following year, given the economy's outcome from before and following recommendations from the economic advisory
board, the government increases their funding of student grants by $80 billion. At the same time, the overall population increased by 100 million
people.
Given the changes in the economy, what is the current level of real GDP per capita? (report your answer at 2 decimal places)
Transcribed Image Text:Consider an economy located near the Indian Ocean where the main industries are agriculture and tourism. Policymakers and economic
advisors have determined that consumers' spending behavior is described by the equation: C = 255 + 0.75DI while the domestic investment
spending behavior by firms is fixed at $250 billion. Currently, the population is 250 million, the labor force participation rate is 68 percent, and the
unemployment rate is 4 percent. The policymakers and economic advisors have also determined that the short run aggregate supply of goods
and services in the economy is described by the equation Y = Ypot + 75(P - Pe), while the potential level of real GDP is $2075 billion and the
expected price level at full employment, Pe, is 115. Net taxes is described by the equation: T = 120 + 0.2Y while the government spending is
fixed at $500 billion. Trading occurs mostly with neighboring economies and currently total imports is $300 billion while total exports is $200
billion.
(Question 8 of 9)
Now consider that in the following year, given the economy's outcome from before and following recommendations from the economic advisory
board, the government increases their funding of student grants by $80 billion. At the same time, the overall population increased by 100 million
people.
Given the changes in the economy, what is the government's current budget balance (billions of dollars)? (report your answer at 2 decimal
places)
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