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    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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    https://brainmass.com/economics/general-equilibrium/consumption-schedule-455967

    Solution Preview

    (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 ...

    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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