ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.9 Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 30, G= 0, and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig+ G+ Xr. Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. 2$ b. What happens to equilibrium Yif lg changes to 10? $ What does this outcome reveal about the size of the multiplier? Multiplier =
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.9 Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 30, G= 0, and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig+ G+ Xr. Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. 2$ b. What happens to equilibrium Yif lg changes to 10? $ What does this outcome reveal about the size of the multiplier? Multiplier =
Chapter18: The Keynesian Model
Section: Chapter Questions
Problem 9SQP
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Transcribed Image Text:ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.9Y.
Assume further that planned investment /g. government spending G, and net exports Xn are independent of the level of real GDP and
constant at lg= 30, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:
Y = C+ lg+ G+ Xp.
Instructions: Round your answers to the nearest whole number.
a. Calculate the equilibrium level of income or real GDP for this economy.
$
b. What happens to equilibrium Yif lg changes to 10?
2$
What does this outcome reveal about the size of the multiplier?
Multiplier =
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