Suppose an economy is represented by the following equations. Consumption function C = 300 + 0.8Yd Planned investment I = 400 Government spending G = 500 Exports EX = 200 Imports IM = 0.1Yd Autonomous Taxes T = 500 Marginal Tax Rate t=0.25 Planned aggregate expenditure AE = C + I + G + (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain how multiplier changes when we have an open economy

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose an economy is represented by the following equations.

Consumption function C = 300 + 0.8Yd

Planned investment I = 400

Government spending G = 500

Exports EX = 200

Imports IM = 0.1Yd

Autonomous Taxes T = 500

Marginal Tax Rate t=0.25

Planned aggregate expenditure AE = C + I + G + (EX - IM)

By using the above information calculate the equilibrium level of income for this economy and explain how multiplier changes when we have an open economy

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