the closed economy of temasik has the following characteristics: autonomous consumption is rm 100 *marginal propensity to consume is 0.9 * investment expenditure is rm 460 *taxes are constant and equal to rm 400 *goverment purchases of goods and services is rm400 a)find the equilibrium level of real GDP b)suppose the goverment cuts its purchases of goods and services to rm 300.using the multiplier formula,calculate the change in real GDP. c)suppose the goverment maintains its purcase of rm400 worth of goods and services and instead cuts taxes to rm 300. using the multiplier formula,calculate the change in real GDP.
the closed economy of temasik has the following characteristics: autonomous consumption is rm 100 *marginal propensity to consume is 0.9 * investment expenditure is rm 460 *taxes are constant and equal to rm 400 *goverment purchases of goods and services is rm400 a)find the equilibrium level of real GDP b)suppose the goverment cuts its purchases of goods and services to rm 300.using the multiplier formula,calculate the change in real GDP. c)suppose the goverment maintains its purcase of rm400 worth of goods and services and instead cuts taxes to rm 300. using the multiplier formula,calculate the change in real GDP.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 6SQ
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the closed economy of temasik has the following characteristics:
autonomous consumption is rm 100
*marginal propensity to consume is 0.9
* investment expenditure is rm 460
*taxes are constant and equal to rm 400
*goverment purchases of goods and services is rm400
a)find the equilibrium level of real
b)suppose the goverment cuts its purchases of goods and services to rm 300.using the multiplier formula,calculate the change in real GDP.
c)suppose the goverment maintains its purcase of rm400 worth of goods and services and instead cuts taxes to rm 300. using the multiplier formula,calculate the change in real GDP.
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