Assignment 3 ECON 1101- Fall 2022

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Instructions

  1. This is a Journal assignment and so please post your response to Journals—Assignment 3.
  2. Please do NOT attach a file for your assignment. 
  3. How to submit your explanation? Type your answer directly in the message area. No attachments for explanations. You can also create a comment to write your explanation.
  4. How to submit your graph? Please do NOT attach a file for your graph. I would like you to upload (a picture of) your graph directly to the message area. To upload a picture of your graph, click on the                         symbol on the bottom right corner of the toolbar.
  • It is extremely important to label your answers correctly in this assignment. Failure to appropriately label answers will result in lost points.

Please see below the spending information pertaining to the participants of a hypothetical economy.

            C = $10 + 0.8Y  

            I = $20                

            G = $30              

            X-M = $10

  • State the name of the economic agent/participant that each equation above would apply to.
  • State the assumptions underlying the equations for C and I. Why do we make these assumptions?
  • Draw a graph to illustrate the desired aggregate expenditures of an economy whose participants have the spending plans provided above.
  • Calculate the value of equilibrium output.
  • How much are consumers saving at equilibrium and how much non-consumer spending is being injected?
  • Assuming that the full-employment level of output is $300, what kind of gap exists and how large is it?  Identify the gap on the graph.
  • What type of policy would you recommend to the policymakers to achieve full-employment level of output? Why? What could be some of the concerns associated with your policy proposal?