Define the fiscal policy. What are the two types of policy mentioned in class? Explain under which economic circumstances the different policies would be implemented, and how the fiscal policy tools would be utilized.
2. Assume the following: C = $200 +.75DI
I = $100
G = $300
Xn = $50
Calculate the equilibrium level of output. What is the multiplier? Show the equilibrium level of output graphically. (Assume government expenditures are the result of deficit spending).
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