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