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In an open economy such that: C = 100 + 0.90 (Y – T)           Md = 0.40 Y - 20 R I = 20 - 10 R                            Ms = 100 + BP X = 30 - 0.10 Y                       BP = X + K T = 40                                     K = 10 + 5R G = 50                                                                                                 Determine the equilibrium levels of Y and R. If G increases to $100, what are the new Y and R?  What is the government spending multiplier?

In an open economy such that: C = 100 + 0.90 (Y – T)           Md = 0.40 Y - 20 R I = 20 - 10 R                            Ms = 100 + BP X = 30 - 0.10 Y                       BP = X + K T = 40                                     K = 10 + 5R G = 50                                                                                                 Determine the equilibrium levels of Y and R. If G increases to $100, what are the new Y and R?  What is the government spending multiplier?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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In an open economy such that:

C = 100 + 0.90 (Y – T)           Md = 0.40 Y - 20 R

I = 20 - 10 R                            Ms = 100 + BP

X = 30 - 0.10 Y                       BP = X + K

T = 40                                     K = 10 + 5R

G = 50                                                

                                               

  1. Determine the equilibrium levels of Y and R.
  2. If G increases to $100, what are the new Y and R?  What is the government spending multiplier? 
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