Question: Keep everything the same as in Test Yourself Question 4 except change investment to I = $1,100. Use the equilibrium condition Y = C +

Keep everything the same as in Test Yourself Question 4 except change investment to I = $1,100. Use the equilibrium condition Y = C + 1 + G + (X - IM) to find the equilibrium level of GDP on the demand side. (In working out the answer, assume the price level is fixed.) Compare your answer to Table and Figure. Now compare your answer to the answer to Test Yourself Question 4. What do you learn about the multiplier?

Figure

FIGURE Illustration of the Multiplier 45 C+ I+G+(X-IM) C+G+(X-IM) E1 | S200 billion Eo 6,000 6,800 Real GDP

Step by Step Solution

★★★★★

3.29 Rating (167 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Y C I G X IM C 300 075DI C 300 075Y 1200 C 300 075Y 900 C 600 075Y Y 600 075Y 1100 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

165-B-E-M-E (87).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

In the economy considered in Test Yourself Question 3, suppose the government, seeing that it has not wiped out the deficit, keeps cutting G until it succeeds in balancing the budget. What level of...

The conditions are the same as in the foregoing problem with the exception that the isothermal process proceeds at the maximum temperature of the whole cycle.

Return to the hypothetical economy in Test Yourself Question 1, and now suppose that both taxes and government purchases are increased by $120. Find the new equilibrium under the assumption that...

5. (More difficult) Keep everything the same as in Test Yourself Question 4 except change investment to I = $1,100. Use the equilibrium condition Y = C + I + G + (X IM) to find the equilibrium level...

Question 1 Not yet answered Marked out of 1.00 Flag question Question text In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption,...

Question 1 Lee works for an insurance company, Lee investigates and settles claims made for insurance compensation. Lee is an insurance Not yet answered Marked out of 1.00 Select one: Flag question...

N Question 1 Not yet answered Marked out of 1.001 Flag question Sigmund ordered and ate a meal at the Blue Fez restaurant. Which of the following statements is TRUE? Select one: OA. The Sale of Goods...

Suppose an economy is characterized by following equations, Consumption: C : 1000 l 0.5(Y T) Investment: I : 500 2007" Government spending: G = 1000 Taxes: T : 1000 Money demand function: (M/P)d : Y...

Given the following information on a bond, Par value: $1000 Interest rate: 6% Coupon rate: 8% paid semiannually Years to maturity: 15 years, what is the expected price at the end of year 5? Select...

The Taylor Company issued $100,000 of 13% bonds on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31 and are due December 31, 2009. Required 1. Assume the company sells...

A portfolio manager in charge of a portfolio worth $80 million isconcerned that stock prices might decline rapidly during the next six months and would like to use put options on an index to provide...

Gamani Ltd ensures that its financial statements adhere to Generally Accepted Accounting Principles ( GAAP ) . One of these principles is the "Consistency Principle." How does the principle benefit...

10. If everything else remains constant and a firm increases its cash conversion cycle, its profitability will likely a. Increase. b. Increase if earnings are positive. c. Decrease. d. Not be...

Suppose you are the sole producer of commodity X, which was just invented to clean the snow from sidewalks more efficiently, and you have produced enough to sell for two winters. If the quantity you...

Explain what a doubling of the number of customers for your snow cleaner will do to the R&D component of your marginal costs.

If two jobs are available, one of which is fun and very respectable and the other unpleasant and dangerous, where would you expect wages to be higher? Is that really so in practice?

Good Gas Plc has recently discovered new oil reserves underneath the North Sea. If the decision to drill is made, the company can produce and sell 5 0 , 0 0 0 barrels of oil in one year s time. The...

Write a program in C++ that calculates the number of dies per wafer. Your program should take die dimensions (width, height, in MILLIMETER and wafer diameter in MILLIMETER and calculate dies per...

Suppose a firm has the following pro forma information: Sales: 1 8 , 0 0 0 , 0 0 0 Variable Costs: 6 , 0 0 0 , 0 0 0 Fixed Costs: 3 , 0 0 0 , 0 0 0 Depreciation: 4 , 0 0 0 , 0 0 0 Tax rate: 2 1 %...