8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where Cis consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C 40 + 0.5 x (Y – T) Suppose G = $315 billion, I = $50 billion, and T = $10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y = C+I+G, the equilibrium output level is equal to s billion.

8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where Cis consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C 40 + 0.5 x (Y – T) Suppose G = $315 billion, I = $50 billion, and T = $10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y = C+I+G, the equilibrium output level is equal to s billion.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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