Congratulations again. You've just been appointed economic adviser to Examland. The mpe is .6; autonomous investment is $1,000; autonomous government spending is $8,000; autonomous consumption is $10,000; and autonomous net exports are $1,000.
a. What is the equilibrium level of income in the country?
b. Autonomous net exports increase by $2,000. What will happen to income?
c. What will happen to unemployment? (Remember Okun's rule of thumb.)
d. You've just learned the mpe changed from .6 to .5. How will this information change your answers in a, b, andc?