Question: Consider a simple macro model with a constant price level and demand-determined output. We are given the following equations: C = 220 + 0.9Y, I

Consider a simple macro model with a constant price level and demand-determined output.

We are given the following equations: C = 220 + 0.9Y, I = 200, G = 100, T = 0.1Y, X = 80, IM = 0.11Y.

Calculate the following values:

a) The marginal propensity to spend (z).

b) Calculate the simple multiplier (SM) in this economy.

c) Equilibrium national income (Y*)

d) Suppose government expenditure suddenly increases by 30. Without determining the equilibrium level of national income, calculate the resulting change in equilibrium national income.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

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

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!