Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10. What is the equilibrium GDP (income)? Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier? Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10. What is the equilibrium GDP (income)? Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier? Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
Chapter9: The Keynesian Model In Action
Section: Chapter Questions
Problem 18SQ
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- Suppose that the consumer’s consumption demand function is given by Cd = 0.8(Y−T)+10. Investment is Id = 20, government expenditure is G = 10, and tax is T = 10.
- What is the equilibrium GDP (income)?
- Suppose that government expenditure increases by 10 units while tax is unchanged. How will GDP change? What is the multiplier?
- Suppose that government expenditure increases by 10 units while tax also increases by 10 units. How will GDP change? What is the multiplier?
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