9. Suppose the economy is characterized by the following behavioral equations: C=co+c₁YD YD=Y-T I = bo + b、Y where co=480, c₁ = 0.5, to= 80, t₁ = 0.25, G = 120, bo=200, and b₁ = 0.25. What is the (income) multiplier for this economy? a. 4 b. 3 c. 2 d. 1 e. All of the answers here are incorrect

9. Suppose the economy is characterized by the following behavioral equations: C=co+c₁YD YD=Y-T I = bo + b、Y where co=480, c₁ = 0.5, to= 80, t₁ = 0.25, G = 120, bo=200, and b₁ = 0.25. What is the (income) multiplier for this economy? a. 4 b. 3 c. 2 d. 1 e. All of the answers here are incorrect

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 4CQ

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6) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁+C₁YD Y₁ = Y-T I=b₁ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must (c₁ +b₁ ) satisfy? Explain your answers? b. Suppose that the parameter bo, sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? Why? What will happen to national saving?
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