Consider the following simple model of an economy:
C = 1,000 + .85(Yd)
I = 780 - 800r
G = 1,000
T = -50 + 0.09(Y)
IM = 100 + 0.1(Y)
EX = 100 + 0.1(Yf), (Assume Foreign Income = 10,000)
Let r* = 11%
Then use this information to solve the following problems.
f. What is the amount of the government budget deficit/surplus?
g. What is the amount of the structural budget deficit/surplus?
h. What is the amount of the cyclical budget deficit/surplus?
i. Is the economy experiencing a trade deficit or surplus? How much?
j. If output were equal to 10,000, What would be the level of real/total/actual investment? Of planned investment? Of unplanned investment? Please calculate these values. Show all work.