You are given the following information for the economy of Datalink: C = 250 + 0.85Yd T = 150 + 0.5Y I = 280 G = 400 X = 600 M = 100 - 0.125Y Determine the equilibrium level of income. What is the value of the multiplier? What is the level of consumption, government revenue and imports at the equilibrium level of income?
You are given the following information for the economy of Datalink: C = 250 + 0.85Yd T = 150 + 0.5Y I = 280 G = 400 X = 600 M = 100 - 0.125Y Determine the equilibrium level of income. What is the value of the multiplier? What is the level of consumption, government revenue and imports at the equilibrium level of income?
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
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You are given the following information for the economy of Datalink:
C = 250 + 0.85Yd
T = 150 + 0.5Y
I = 280
G = 400
X = 600
M = 100 - 0.125Y
Determine the equilibrium level of income.
What is the value of the multiplier?
What is the level of consumption, government revenue and imports at the equilibrium level of income?
If the government wishes to increase the equilibrium level of income by 200 to close a deflationary gap, by how much must government spending rise to achieve this?
What is the government’s budget stance?
Produce a sketch of your answers in (i) and (iv) above.
Assume that this hypothetical economy is experiencing a severe recession, by how much would government spending have to increase to shift the aggregate demand curve rightward by GH¢ 2500.
How large a tax cut would be needed to achieve this same increase in equilibrium income? Why does the tax cut not have the same effect as the increase in government spending?
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