3. Suppose an economy is represented by the following equations. Consumption function C = 200 + 0.8Yd
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3. Suppose an economy is represented by the following equations.
Consumption function C = 200 + 0.8Yd
Planned investment I = 400
Government spending G = 600
Exports EX = 200
Imports IM = 0.1Yd
Autonomous Taxes T = 500
Marginal Tax Rate t=0.2
Planned aggregate expenditure AE = C + I + G + (EX - IM)
By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy
Related Book For
Principles of Macroeconomics
ISBN: 978-0134078809
12th edition
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
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