Assume an economy with no government or foreign trade and, Ask an Expert

Economics

Assume an economy with no government or foreign trade and the following equations:

C=150+.9DI, I=250

a) What is equilibruim output?

b) What are the equilibrium savings (savings at equilibrium output)? Now assume the country decides it needs to save more. So assume individuals reduce their MPC from .9 to .8 (through autonomous consumption remains 150).

c) What is the new level of equilibruim savings?

d) Please explain the result.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92199471

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