Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25% Full employment level of income = 3575 Calculate total autonomus spending for economy X. Calculate the multiplier for economy X. Calculate the equilibrium income for the economy.

Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25% Full employment level of income = 3575 Calculate total autonomus spending for economy X. Calculate the multiplier for economy X. Calculate the equilibrium income for the economy.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 1TY

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Use the following information on economy X to answer the questions below. Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25% Full employment level of income = 3575 a) Calculate total autonomus spending for economy X. b) Calculate the multiplier for economy X. c) Calculate the equilibrium income for the economy. d) Calculate the change in government spending required to reach full employment level of income.
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