Essentials of Economics 8th Edition by Bradley Schiller

Exercise 6

The following table presents hypothetical data on government expenditure, taxes, exports, imports, inflation, unemployment, and pollution for three levels of equilibrium income (GDP). A government decision maker is trying to determine the optimal level of government expenditures, with each of the three columns being a possible choice. At the time of the choice the inflation index iS₁ .0. Dollar amounts are in billions per year.
( a ) Compute the federal budget balance, balance of trade, and real GDP for each level of nominal GDP.
( b )What government expenditure level would best accomplish each of the following goals? Lowest taxes
Largest trade surplus
Lowest pollution
Lowest inflation rate
Lowest unemployment rate
Highest amount of public goods and services
Highest real income
Balancing the federal budget
Achieving a balance of trade
Maintaining price stability
Achieving full employment
( c )What government expenditure levels would most flagrantly violate each of the preceding goals?
( d )Which policy would be in the best interests of the country?
( e )What policies, in addition to changes in government expenditures, might the government use to attain more of its desired goals?