Question

1) If C = 1000 + 7/8[GDP-1000], I = 700 and G = 1000 and the economy is currently in equilibrium at 400 below full employment GDP, the correct fiscal policy would be to increase G by?

2) If C = 500 + 3/4[GDP- 100], I = 300, G = 400, Xn =- 10 and full employment GDP is 210 less than current GDP, the proper action would be to increase taxes by?

Answer 1

705
3987.5

Answer 2

Thanks Alice for trying, but that's not correct, the first answer is 50 I figured it out, but I'm still having a hard time with the 2nd question.