In a closed economy, consumers spend $400 regardless of the level of income, and the marginal propensity to consume (MPC) is 0.80. Investment is equal to $250. The government spends $300 and collects $200 in taxes. The equilibrium level of GDP in this economy is $ (enter your response rounded to the nearest dollar).

In a closed economy, consumers spend $400 regardless of the level of income, and the marginal propensity to consume (MPC) is 0.80. Investment is equal to $250. The government spends $300 and collects $200 in taxes. The equilibrium level of GDP in this economy is $ (enter your response rounded to the nearest dollar).

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.B: Algebraic Treatment Of Taxes And Fiscal Policy

Problem 1TY

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