Suppose that Marvel Kingdom economy is characterized by the following equations. Aggregate consumption: C = 100 + 0.75Y, Investment: I = 500– 5r Government spending on goods and services: G = 200 Lump-sum tax: Net Export: T = 300 NX = 200 Interest rate: : r = 5% Yp is disposable income, Y is real output, while r is interest rate (in percentage). Yp, Y, C, I, G, T, and NX are in trillions Marvel Dollar (MD) Solve for the initial equilibrium output (Y,) and find the economic multiplier. If the government aims for a target output level (Y,) of MD 3500 trillion, how much will output increase and how much should the government set its spending to achieve the targeted output level?

Suppose that Marvel Kingdom economy is characterized by the following equations. Aggregate consumption: C = 100 + 0.75Y, Investment: I = 500– 5r Government spending on goods and services: G = 200 Lump-sum tax: Net Export: T = 300 NX = 200 Interest rate: : r = 5% Yp is disposable income, Y is real output, while r is interest rate (in percentage). Yp, Y, C, I, G, T, and NX are in trillions Marvel Dollar (MD) Solve for the initial equilibrium output (Y,) and find the economic multiplier. If the government aims for a target output level (Y,) of MD 3500 trillion, how much will output increase and how much should the government set its spending to achieve the targeted output level?

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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