The change in equilibrium output

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1- You are given the following information on the macroeconomy:

Consumption: 200 + 0.75 Y

Investment: 100 + 0.10 Y

Government Spending: 500

Exports 100

Imports 50 + 0.25 Y

Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million.

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Solution Preview

The equation for GDP is

Y = C + I + G + X - M

Given
Consumption: 200 + 0.75 Y
Investment: 100 + 0.10 Y
Government Spending: 500
Exports 100
Imports ...

Solution Summary

Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million.

$2.49