Given the following equation for an open economy:

C = 700 + 0.7 (Y – T)

I = 400

G = 400

T = 200

X = 500

M = 80 + 0.6Y

The calculation is as follows:

a. The equilibrium level of GDP (Ye)

b. Net exports

c. Multiplier

If the number of investments changes from 400 to 600, how will your answers to each of the above questions (ie the new equilibrium level of GDP (Ye1), new net exports, and new multipliers) change?

d. The new equilibrium level of GDP (Ye1)

e. New net exports

f. New multiplier

G. What does the term "recession gap" mean?

h. If the full employment level (Yf) of GDP is 2200 and the investment level is the original level of 400, what is the size of the recession gap in part (a) above?

Answer rating: 100% (QA)

a Ye C I G XM Ye 700 07Y200 400 400 5008006Y Ye 700 07Y 140 400 400 420 06Y Ye 1970 01Y Ye 1970 This is the equilibrium level of GDP b We can use the ... View the full answer