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Assume that all expenditure is summarized in the following consumption and investment functions: C = $300 billion + 0.8 YD I = $200 billion Use this information to complete this problem: (2.5 points for each part ) Identify the equilibrium rate of output (or GDP) . If full-employment GDP equals $2700 billion ,what kind of Gap will develop (recessionary or Inflationary ) ? Explain clearly. How much is the gap ? What is the value of the multiplier? What would happen to equilibrium GDP if the rate of investment increased to $250 from current $200 billion per year? What will happen to Equilibrium GDP if Govt. takes a stimulus plan by increasing its spending by $50 billion ?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92196430

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