Suppose that for a particular economy and period, investment was equal to 100, government expenditure was equal to 75, net takes were fixed at 100, and consumption (C) was given by the consumption function

C = 25 + 0.8 Y

Where Y is disposable income and Y is GDP.

a. What is the level of equilibrium income (Y)?
b. What is the value of the government expenditures multiplier (delta Y / delta G)? Of the tax multiplier (delta Y/delta G)? Of the tax multiplier (delta Y/ delta T)?

Answer rating: 100% (QA)

a Y C I G Y 25 08Y 100 75 Y 200 08Y 02Y 200 Y 1000 Answer b Su... View the full answer