Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10. What is the equilibrium GDP (income)? Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier? Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10. What is the equilibrium GDP (income)? Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier? Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10.
- What is the equilibrium
GDP (income)? - Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier?
- Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
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