Consider an open economy described by the following equations: C = 400 + 0.90 (Y – T) X = 100 - 0.10 Y I = $300 G = $200 T = $150 What is the equilibrium level of national income? If both government spending and taxes increase by $10 each, what happens to the national income? Does the balanced budget multiplier theorem hold?

Consider an open economy described by the following equations: C = 400 + 0.90 (Y – T) X = 100 - 0.10 Y I = $300 G = $200 T = $150 What is the equilibrium level of national income? If both government spending and taxes increase by $10 each, what happens to the national income? Does the balanced budget multiplier theorem hold?

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 9SQ

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Question

Consider an open economy described by the following equations:

C = 400 + 0.90 (Y – T) X = 100 - 0.10 Y

I = $300 G = $200

T = $150

What is the equilibrium level of national income?
If both government spending and taxes increase by $10 each, what happens to the national income? Does the balanced budget multiplier theorem hold?

Definition Definition Monetary value of all goods and services produced in an economy during a financial year. National income also refers to the total income earned by the factors of production during a financial year.

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