| Study Tools ons cess Tips cess Tips ack O Back to Assignment Attempts 1 Keep the Highest 1/3 2. Algebra of the income-expenditure model Consider the imaginary small country of Auyuittuq. Assume that Auyuittuq is closed to trade, so that its net exports are equal to zero. Suppose that the economy is described by the following consumption function, where C is consumption, Y is income (real GDP), Ip is planned investment, G is government purchases, and T is taxes: C= $25 billion +0.75 (Y-T) Suppose G= $30 billion, Ip = $60 billion, and T = $20 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y=C+Ip+ G, the equilibrium income level is $ billion. Suppose that government purchases are increased by $100 billion. The new equilibrium level of income will be equal to $ billion. Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to Grade It Now Save & Continue Continue without saving

2. Algebra of the income-expenditure model Consider the imaginary small country of Auraittuq. Assume that Auruituq is dosed to trade, so that its oet experts are equal to zere. Suppose that the econemy is described by the fellowing consumption function, where C is consumption, Y is income (real GDP ), IP is plamed investreent, G is government purchases, and T is taxes: C125billiot+0.75(T) Suppose G=$20 billion, IF$60 bilion, and T=$20 bilion. incerne level is billion. bilion. Based on the effect ot the change in government purchases on equitibrium inceme, you can tel that this economys multiplier is equal to