Economics 4801

Fall 2009

Dr. Dao

Solution to Quiz 1 (graduate credit)

a. Y = [2200 – (0.5)*1900 – 100 + 2400 + 1850)]/(1 – 0.5) = 10800; C = 2200 + (0.5)*(10800-1900) = 6650; S = Y – T – C = 10800 – 1900 – 6650 = 2250

b. s = 1 – c = 0.5

c. There is a surplus of 1900 – 1850 = 50

d. I_p + G + + NX = S + T_α; 2400 +1850 – 100 = 4150 = 2250 + 1900

e. New Y = old Y + ΔY ; ΔY = multiplier * ΔG = 2 * 140 = 280; New Y = 10800 + 280 = 11080