a)
To compute: The equilibrium
a)
Answer to Problem 3TY
The equilibrium GDP has been derived as
Explanation of Solution
The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.
The GDP is calculated as follows:
Where
By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:
As the rate of interest is 8 percent and
Simplifying further by bringing the variable on to the left hand side:
Thus the equilibrium level of GDP has been derived as
When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:
Surplus Budget
Deficit Budget
Wherein
Since it is negative value at
When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:
Since it is a negative value at
b)
The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.
b)
Answer to Problem 3TY
The equilibrium GDP has been derived as
Explanation of Solution
The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.
The GDP is calculated as follows:
Where
By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:
As the rate of interest is 8 percent and
Simplifying further by bringing the variable on to the left hand side:
Thus the equilibrium level of GDP has been derived as
When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:
Surplus Budget
Deficit Budget
Wherein
Since it is negative value at
When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:
Since it is a negative value at
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