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Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume

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Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports X n are independent of the level of real GDP and constant at I g = 30 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn.
a. Calculate the equilibrium level of income or real GDP for this economy.
b. What happens to equilibrium Y if Ig changes to 10? What does this outcome reveal about the size of the multiplier?

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a Real domestic output GDP YI C I g X n Aggregate expenditures …View the full answer


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Economics

Economics

ISBN: 978-0073375694

18th edition

Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

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Question Posted: May 23, 2013 07:53:56
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