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Suppose that the economy is at full employment our economy has reached its potential gdp or the maximum that we


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1.Suppose that the economy is at full employment (our economy has reached its potential GDP or the maximum that we ...

imum that we can normally produce). Now suppose that the Federal Government decides to decrease taxes. If we compare the long run price and GDP levels to the price and GDP levels that existed before the Federal Government’s action, we would find that_______? A. Production or the GDP would not increase in the long run. B. Prices would decrease in the long run. C. A decrease in unemployment would result in the long run. D. Producers would increase production in the long run as a result of the Federal Government’s actions
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2. Assume that the consumption function for a private open economy, Azania, is such that C = 50 + 0.8Y. ...

. Also assume further that planned investment Ig and net exports Xn as well as G are respectively 30, 10, and 100 million respectively, calculate (a) the equilibrium income and (b) total consumption for this economy. Suppose the economy achieved Xn = 0, how much have (c) income and (d) consumption changed? Recall the real output Y in the economy equals C + Ig + G + Xn. Show all work.
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1.AU MAT 120 Systems of Linear Equations and Inequalities Discussion

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