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I only need an answer for parts d, e, and f please: Monetary
& Fiscal Policy, and Debt: Given: 1)Y = C + I + G + NX 2)C = 49
+ 0.9DI 3)T = 10 + 1/3Y 4)I = 400 – 2,000(i) 5)G = 800 6)NX = 60 a)
If the FED decides to set the interest rate at i = 0.05, what will
be equilibrium GDP? b) State the Government Budget and indicate
whether it is in surplus or in a deficit. c) A recession hits the
economy which leads to a reduction in consumption, specifically
assume for now: C = 106 + 0.6DI. Compute the new GDP and the new
budget. d) Democrats and Republicans are arguing about whether to
reduce taxes or increase Government expenditure to stimulate the
economy. Since they haven’t found a compromise, yet, the FED
decides to step in and take some actions. i. Describe the policy
tools the FED can use. ii. If Janet Yellen (current Chair of the
FED) asked you for advice on which policy tool to use, what would
you recommend her to do and why? (Hint: The “why” part is what I
really care about here. You have to justify your choice, otherwise
you get zero credit for this question.) e) Republicans won the
argument so that the government cuts the tax rate from 1/3 to 1/6
while at the same time the FED lowers the interest rate from 0.05
to 0.02. What will be the new GDP? Note that the consumption
function from part c) is still valid here. f) Finally, given your
results in e), discuss the implications on government debt and
whether you find that troubling or not.