Consider an economy with the following data: Consumption expenditure = $171,701.1 million Planned investment = $119,020.5 million Government expenditure = $48,621.7 million Export expenditure =...

Consider an economy with the following data:

Consumption expenditure = $171,701.1 million


Planned investment = $119,020.5 million


Government expenditure = $48,621.7 million


Export expenditure = $840,223.9 million


Import expenditure = $720,695.8 million


Autonomous taxes = $206,700.0
million

Income tax rate = 17.5%


Marginal propensity to save = 0.42


Marginal propensity to import = 0.08

Section A

Part (1)

Calculate the level of autonomous consumption when the level of income equals $466,312.6 million (solve to one decimal point).

Part (2)

Calculate the level of total taxation when the level of income equals $466,312.6 million (solve to one decimal point).

Part (3)

Calculate the level of actual investment when income is equal to $466,312.6 million and the unintended inventory investment (solve to one decimal point).

Part (4)

Calculate autonomous imports when income is equal to $466,312.6 million (solve to one decimal point).

Part (5)

Calculate autonomous net exports (solve to one decimal points).

Part (6)

Calculate autonomous planned expenditure (solve to one decimal point).

Part (7)

Is this economy in equilibrium when income equals $466,312.6 million? If not, what is the equilibrium level of income for this economy? (solve to one decimal point).

Part (8)

Illustrate this economy using the aggregate expenditure model. On your diagram, identify the equilibrium level of income as calculated in part 7 and the actual level of income ($466,312.6 million). Identify the vertical distance that represents unplanned inventory investment calculated in part 3.

Ensure you label all axis and each component (line) you draw in your diagram.

According to this model, explain how this economy will move to the equilibrium level of income. (100-word limit)

State the word count at the end of the paragraph

Part (9)

Calculate the expenditure and tax multipliers for the economy (solve to two decimal points).

Section B

Assume that your economy is now operating at the equilibrium level in the short-run as calculated in part (7).

Part (10)

Illustrate the GDP gap using the AD-AS Model and the AE Model, if the natural level of income is estimated as $450,000 million.

Part (11)

If the government wants to close the existing GDP gap, calculate the change in spending that would have to be undertaken - specify whether this will be an increase or decrease in spending. (solve to one decimal point)

Part (12)

If the government decides to close the existing GDP gap using taxation policy, calculate the change in autonomous taxes required to close the gap - specify whether this an increase or decrease in autonomous taxation. (solve to one decimal point)

Part (13)

Assume the central bank decides to move and close the GDP gap instead of fiscal policy.
In what direction will interest rates have to move to close the GDP gap and what type of open market operation will the central bank undertake?

Part (14)

Using the exchange rate market model, illustrate and explain how the monetary policy action identified in part (13) may affect the exchange rate. Identify the new equilibrium on the diagram as point B. (100-word limit)

State the word count at the end of the paragraph

Part (15)

Using the IS-LM model, illustrate and explain how the economy and the unemployment may be impacted as a result of the change in the exchange rate in part (14). Identify the new equilibrium on the diagram as point B. (100-word limit)

State the word count at the end of the paragraph