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Multiplier effect on equilibrium output in aggregate expenditure model

Use the following information on the variables in the open economy aggregate expenditure model:

Autonomous Consumption C0= 200
Autonomous Investment I0= 200
Government Spending G0=100
Export Spending X0 =100
Autonomous Import spending M0= 100
Taxes T0=0
Marginal propensity to consume c1= 0.8
Marginal propensity to invest i1= 0.1
Marginal propensity to import m1= 0.15

A- Compute the equilibrium level of income

B- If Government spending increases from 100 to 300, Compute the new equilibrium

C- Compute the value of the multiplier.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916650

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