(a) Assume Consumption (C) is given by the equation C = 500 + 0.6(Y – T). Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment is given by the equation I = 2,160 – 100r, where r = the real interest rate = 13 percent. In this case, what is the equilibrium Gross Domestic Product (GDP)/Total output (Y)/Total income? How does the equilibrium income change if government designs and executes expansionary fiscal policy? Show graphically and mathematically
(a) Assume Consumption (C) is given by the equation C = 500 + 0.6(Y – T). Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment is given by the equation I = 2,160 – 100r, where r = the real interest rate = 13 percent. In this case, what is the equilibrium Gross Domestic Product (GDP)/Total output (Y)/Total income? How does the equilibrium income change if government designs and executes expansionary fiscal policy? Show graphically and mathematically
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
Problem 4TY
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(a) Assume Consumption (C) is given by the equation C = 500 + 0.6(Y – T).
Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment
is given by the equation I = 2,160 – 100r, where r = the real interest rate = 13
percent. In this case, what is the equilibrium
(GDP)/Total output (Y)/Total income? How does the equilibrium income
change if government designs and executes expansionary fiscal policy? Show
graphically and mathematically.
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