Given the following equations from the Keynesian Cross Model (fixed prices, no asset market):

C = 100 + 0.8 (Y-T)
T = -600 + 0.4 Y
I = 100 + 0.22 Y
G = 430
X = 400
M = 200 + 0.1 Y
Y = C + I + G + X – M = C + S + T (Goods Market Equilibrium)

a) Solve for Y in equilibrium.
b) If the equilibrium GDP level you calculated in part A is 200 units below full employment level, what policy measures could be taken by the government to reach full employment? By how much should each policy measure change? (Hint: name at least two measures)

Question

Given the following equations from the Keynesian Cross Model (fixed prices, no asset market):

C = 100 + 0.8 (Y-T)
T = -600 + 0.4 Y
I = 100 + 0.22 Y
G = 430
X = 400
M = 200 + 0.1 Y
Y = C + I + G + X – M = C + S + T (Goods Market Equilibrium)

a) Solve for Y in equilibrium.  
b) If the equilibrium GDP level you calculated in part A is 200 units below full employment level, what policy measures could be taken by the government to reach full employment? By how much should each policy measure change? (Hint: name at least two measures)