. Suppose an economy is represented by the following equations. Consumption function C = 100 + 0.8Yd Planned investment I = 38 Government spending G = 75 Exports EX = 25 Imports IM = 0.05Yd Autonomous Taxes T = 40 Planned aggregate expenditure AE = C + I + G + (EX - IM) a. By using the above information calculate the equilibrium level of income for this economy. b. Calculate the value of expenditure multiplier. c. Suppose that government spending is increased by 5, what will happen to the equilibrium income level?
. Suppose an economy is represented by the following equations. Consumption function C = 100 + 0.8Yd Planned investment I = 38 Government spending G = 75 Exports EX = 25 Imports IM = 0.05Yd Autonomous Taxes T = 40 Planned aggregate expenditure AE = C + I + G + (EX - IM) a. By using the above information calculate the equilibrium level of income for this economy. b. Calculate the value of expenditure multiplier. c. Suppose that government spending is increased by 5, what will happen to the equilibrium income level?
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
Problem 4TY
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Question
. Suppose an economy is represented by the following equations.
Consumption function C = 100 + 0.8Yd
Planned investment I = 38
Government spending G = 75
Exports EX = 25
Imports IM = 0.05Yd
Autonomous Taxes T = 40
Planned aggregate expenditure AE = C + I + G + (EX - IM)
a. By using the above information calculate the equilibrium level of income for this
economy.
b. Calculate the value of expenditure multiplier.
c. Suppose that government spending is increased by 5, what will happen to the
equilibrium income level?
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