Assume that the consumption schedule for a mixed open economy is such that consumption is:   C = 250 + 0.8Yd      Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 50 and Xn = 30. Lastly, assume government spending G = 40 and taxes T = 40. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:   Y = C + Ig + G + Xn   Given that taxes T are present, the consumption schedule can be rewritten as:   C = 250 + 0.8(Y - T)      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 Xn changes to 40?        Equilibrium GDP (Y)  = $  .        What does this outcome reveal about the size of the spending multiplier?        Spending multiplier =  .

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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ADVANCED ANALYSIS  Assume that the consumption schedule for a mixed open economy is such that consumption is:

 

C = 250 + 0.8Yd

    
Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 50 and Xn = 30. Lastly, assume government spending = 40 and taxes = 40. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:

 

Y = C + Ig + G + Xn

 

Given that taxes are present, the consumption schedule can be rewritten as:

 

C = 250 + 0.8(Y - T)

    

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 Xn changes to 40?

 

     Equilibrium GDP (Y)  = $  .

 

     What does this outcome reveal about the size of the spending multiplier?

 

     Spending multiplier =  .

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