# Consumption schedule

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Assume that the consumption schedule for a private open economy is such that consumption C= 50+0.8Y. Assume further that planned investment I g =30 and X n=10. Recall also that in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y =C+I g + X n

A) Calculate the equilibrium level of income or real GDP for this economy.

B) What happens to equilibrium Y if I g changes to 10? What does this outcome reveal about the size of the multiplier?

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##### Solution Summary

Assume that the consumption schedule for a private open economy is such that consumption C= 50+0.8Y. Assume further that planned investment I g =30 and X n=10. Recall also that in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y =C+I g + X n

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(A) We are given that:

I g =30 and X n=10

C = 50 + 0.8Y ........equn. (1)

Y=C + Ig + Xn .......equn. (2)

Substitute C, Ig, and Xn, into ...

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