An economy is characterized by the following desired consumption and investment functions: C = 543 + 0.72Y and I = 752. Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for the multiplier to 3 decimal places. Example: 0.001 Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired consumption. What is the new equilibrium GDP level for the economy? Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function graphically. Part (d): Suppose the desired investment levels returns to I = 752, but now consumers spend 86 cents of every dollar earned. What is the new equilibrium GDP level for the economy? Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function graphically.
An economy is characterized by the following desired consumption and investment functions: C = 543 + 0.72Y and I = 752. Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for the multiplier to 3 decimal places. Example: 0.001 Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired consumption. What is the new equilibrium GDP level for the economy? Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function graphically. Part (d): Suppose the desired investment levels returns to I = 752, but now consumers spend 86 cents of every dollar earned. What is the new equilibrium GDP level for the economy? Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function graphically.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![An economy is characterized by the following desired consumption and investment functions:
C = 543 + 0.72Y and I = 752.
Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for
the multiplier to 3 decimal places. Example: 0.001
Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired
consumption. What is the new equilibrium GDP level for the economy?
Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function
graphically.
Part (d): Suppose the desired investment levels returns to I =
752, but now consumers spend 86 cents
of every dollar earned. What is the new equilibrium GDP level for the economy?
Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function
graphically.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa0408b33-59ca-4fb5-b2bb-2befa2fc9f58%2F8c63bea6-6bc7-4bc3-bccd-e121bc647322%2Fot6k4ck_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An economy is characterized by the following desired consumption and investment functions:
C = 543 + 0.72Y and I = 752.
Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for
the multiplier to 3 decimal places. Example: 0.001
Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired
consumption. What is the new equilibrium GDP level for the economy?
Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function
graphically.
Part (d): Suppose the desired investment levels returns to I =
752, but now consumers spend 86 cents
of every dollar earned. What is the new equilibrium GDP level for the economy?
Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function
graphically.
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