1) IMF orders country A to cut its budget by 25% and reduce the value of its currency by 40%. Before these changes the country had a GDP of 4000 billion and a G of 1200 billion, a trade deficit of 300 billion and a C of 2000 billion. After the IMF suggestions the following changes were noticed: a trade surplus of 100 billion, a reduction in C of 5%, and an increase in I of 50%. What is country A's GDP after the IMF orders were implemented?
2) Country X has a balanced budget, an actual GDP of 15,500 billion and a gap to potential GDP of 1000 billion. There are 2 political parties: the Bronze Age Party which recommends to cut taxes by 400 billion if elected, and the Spend Happy Party which suggests a 500 billion budget deficit. a) what will be the inflation rate if the Bronze Age Party wins and implements its platform? b) What will be the inflation if the Spend Happy Party wins and implements its platform?
3) Country A is on the PPF. It decides to run a budget deficit of 100 billion. Both its potential and actual GDP is 800 billion. What will happen if country A decides to run this deficit? And why? Give a full explanation for this expected result.