Given the following simple Keynesian Model: Y = C + I + G + X-M, where Consumption schedule is given as C= 100 +0.75Y Investment (I) = 50 Government (G) = 100 and Net Export (X-M) = 20 i. Calculate the Equlibrium Level of Income ii. Calculate the size of Consumption at the Equilibrium Level iii. Calculate the value of the Government Multiplier iv. Assume Investment (I) changes by 50; calculate the new equilibrium level of Income

Given the following simple Keynesian Model: Y = C + I + G + X-M, where Consumption schedule is given as C= 100 +0.75Y Investment (I) = 50 Government (G) = 100 and Net Export (X-M) = 20 i. Calculate the Equlibrium Level of Income ii. Calculate the size of Consumption at the Equilibrium Level iii. Calculate the value of the Government Multiplier iv. Assume Investment (I) changes by 50; calculate the new equilibrium level of Income

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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) Given the following simple Keynesian Model: Y = C + I + G + X-M, where Consumption schedule is given as C= 100 +0.75Y Investment (I) = 50 Government (G) = 100 and Net Export (X-M) = 20

i. Calculate the Equlibrium Level of Income

ii. Calculate the size of Consumption at the Equilibrium Level

iii. Calculate the value of the Government Multiplier

iv. Assume Investment (I) changes by 50; calculate the new equilibrium level of Income

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