Suppose the economy of Apple Republic is represented by the following equations: Z = C +I+G C = 500 + .5YD T= 600 | = 300 YD = Y - T G = 2000 (Enter number only into the boxes) a. Given the above variables, calculate the equilibrium level of output (Y) disposable income (Yp) and consumption (C) Hint: First specify (using the above numbers) the demand equation (Z) for this economy. Second, using the equilibrium condition, equate this expression with Y. Once you have done this, solve for the equilibrium level of output (Y). Third, once you get Y, you can T from Y to get YD. Finally, once you get Yp, you substitute it into the consumption equation to get consumption (C).
Suppose the economy of Apple Republic is represented by the following equations: Z = C +I+G C = 500 + .5YD T= 600 | = 300 YD = Y - T G = 2000 (Enter number only into the boxes) a. Given the above variables, calculate the equilibrium level of output (Y) disposable income (Yp) and consumption (C) Hint: First specify (using the above numbers) the demand equation (Z) for this economy. Second, using the equilibrium condition, equate this expression with Y. Once you have done this, solve for the equilibrium level of output (Y). Third, once you get Y, you can T from Y to get YD. Finally, once you get Yp, you substitute it into the consumption equation to get consumption (C).
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.3P
Related questions
Question
![Suppose the economy of Apple Republic is represented by the following equations:
Z = C +|+ G
C = 500 + .5YD
T= 600
|= 300
YD = Y - T
G = 2000
(Enter number only into the boxes)
a. Given the above variables, calculate the equilibrium level of output (Y)
disposable income (Yp)
and consumption (C)
Hint: First specify (using the above numbers) the demand equation (Z) for this economy. Second, using the equilibrium condition, equate this expression with Y. Once
you have done this, solve for the equilibrium level of output (Y). Third, once you get Y, you can T from Y to get Yp. Finally, once you get Yp, you substitute it into the
consumption equation to get consumption (C).
b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output (Y)
? What is the multiplier
for this economy
c. Now, assume that G is still at 2000, but taxes increase from 600 to 700. What is the new equilibrium level of output (Y)
? What is the multiplier
for this economy
d. Now, assume that G=2000 and T=600, but consumer confidence decreases causing a reduction in autonomous consumption (co) from 500 to 400. What is the new
equilibrium level of output (Y)
? What is the multiplier for this economy](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa61d3153-2818-4412-8cd6-ecbf1177ab6e%2Fb7b9a569-e4c0-4d34-b0f0-71b336fc3e0a%2F5c6aogl_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose the economy of Apple Republic is represented by the following equations:
Z = C +|+ G
C = 500 + .5YD
T= 600
|= 300
YD = Y - T
G = 2000
(Enter number only into the boxes)
a. Given the above variables, calculate the equilibrium level of output (Y)
disposable income (Yp)
and consumption (C)
Hint: First specify (using the above numbers) the demand equation (Z) for this economy. Second, using the equilibrium condition, equate this expression with Y. Once
you have done this, solve for the equilibrium level of output (Y). Third, once you get Y, you can T from Y to get Yp. Finally, once you get Yp, you substitute it into the
consumption equation to get consumption (C).
b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output (Y)
? What is the multiplier
for this economy
c. Now, assume that G is still at 2000, but taxes increase from 600 to 700. What is the new equilibrium level of output (Y)
? What is the multiplier
for this economy
d. Now, assume that G=2000 and T=600, but consumer confidence decreases causing a reduction in autonomous consumption (co) from 500 to 400. What is the new
equilibrium level of output (Y)
? What is the multiplier for this economy
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