Question: QUESTION 14 Use data below to answer the following questions: C = 0.7 Y I = 350 G = 650 Consider the income-expenditure identity in

QUESTION 14

Use data below to answer the following questions:

C = 0.7 Y

I = 350

G = 650

Consider the income-expenditure identity in a closed economy, Y = C + I + G.Suppose consumptionis always a fraction (mpc) of income such thatC = mpc *Y.

1.What is the value of Y? ________

2.If G increases to700, with I remaining constant, what is the new value of Y? _____________

3.What is the ratio 1/(1-mpc)?

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