Consider the following Keynesian macroeconomic model Y = C +1+G C = 200 + 0.8Y = 1000 – 2000R - where Y is national income, C is (planned) consumption expenditure, I is investment expenditure, G is government expenditure and R is the interest rate. Use Cramer's Rule to solve for Y*, and evaluate the effect of a USD 50 billion decrease in government spending on national income.

Consider the following Keynesian macroeconomic model Y = C +1+G C = 200 + 0.8Y = 1000 – 2000R - where Y is national income, C is (planned) consumption expenditure, I is investment expenditure, G is government expenditure and R is the interest rate. Use Cramer's Rule to solve for Y*, and evaluate the effect of a USD 50 billion decrease in government spending on national income.

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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