Consider a closed economy with a government. Consumption is given by C = 1,000 + 0.8Yd Further, t = 0.2, I = 500 and G = 300. Compute the equilibrium level of output. Suppose that G rise
Consider a closed economy with a government. Consumption is given by C = 1,000 + 0.8Yd Further, t = 0.2, I = 500 and G = 300. Compute the equilibrium level of output. Suppose that G rise
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 6TY
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Consider a closed economy with a government. Consumption is given by
C = 1,000 + 0.8Yd Further, t = 0.2, I = 500 and G = 300.
- Compute the equilibrium level of output.
- Suppose that G rises to 400. How much of Y rises as a result?
- Compute the size of the expenditure multiplier.
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