Question

Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y. Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig. Instructions: Enter your answers as whole numbers. a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .

          Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y. Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig.

Instructions: Enter your answers as whole numbers.

a. Calculate the equilibrium level of income or real GDP for this economy.
Equilibrium GDP (Y) = $ .

b. What happens to equilibrium GDP if Ig changes to 60?
Equilibrium GDP (Y) = $ .
What does this outcome reveal about the size of the spending multiplier?
Spending multiplier = .

Added by Emilio M.

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