Suppose an imaginary economy is represented by the, Ask an Expert

Economics

Suppose an imaginary economy is represented by the following equations:

GDP= C + I

C= $100 + 0.8 Y D

I = I Planned + I Unplanned

Iplanned = $200

AEplanned = C+IPlanned

(1) Calculate the income- expenditure equilibrium level GDP. Show your work.

(2) Suppose the level of planned investment spending (Iplanned) drops by $50 . What will the new equilibrium GDP be? Show your work

(3) With Iplanned back at the original level $200, suppose that autonomous consumption spending decreases from $100 to $60. What will the new equilibrium be? Show your work.

(4) Calculate the value of the multiplier.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91673280

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