Consider an economy in which tax collections are always $400 and in which the four components of aggregate demand are as follows: GDP Taxes DI C I G (X - IM) $1,360 $400 $960 $720 $200 $500 $30 1,480 400 1,080 810 200 500 30 1,600 400 1,200 900 200 500 30 1,720 400 1,320 990 200 500 30 1,840 400 1,440 1,080 200 500 30 Find the equilibrium of this economy graphically. What is the marginal propensity to consume? What is the multiplier? What would happen to equilibrium GDP if government purchases were reduced by $60 and the price level remained unchanged?
- Consider an economy in which tax collections are always $400 and in which the four components of aggregate demand are as follows:
$1,360 $400 $960 $720 $200 $500 $30
1,480 400 1,080 810 200 500 30
1,600 400 1,200 900 200 500 30
1,720 400 1,320 990 200 500 30
1,840 400 1,440 1,080 200 500 30
Find the equilibrium of this economy graphically. What is the marginal propensity to consume? What is the multiplier? What would happen to equilibrium GDP if government purchases were reduced by $60 and the price level remained unchanged?
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