Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment,...

 

 

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Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment, I = $1.5 trillion; government spending G-$2 trillion; Taxes are proportional to GDP with t-0.10 (Thus total taxes will be equal to t multiplied by Y); the consumption function, C(Y-T)= $2 trillion +0.9((1-t)Y); EX= $2 trillion; and IM- $1 trilliion +0.06Y. a. Find the equilibrium level of output? b. What is the equilibirium level of consumption? Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment, I = $1.5 trillion; government spending G-$2 trillion; Taxes are proportional to GDP with t-0.10 (Thus total taxes will be equal to t multiplied by Y); the consumption function, C(Y-T)= $2 trillion +0.9((1-t)Y); EX= $2 trillion; and IM- $1 trilliion +0.06Y. a. Find the equilibrium level of output? b. What is the equilibirium level of consumption?

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a To find the equilibrium level of output set planned aggregate ... View the full answer