The current position of the economy is given by the following variables:
Ca = 1500 (autonomous consumption)
G = 5000
T = 200
I = 2000
X= 100
M = 200
MPC = 0.75
Y (income) = Aggregate expenditures (C+I+G+X-M)
Find the equilibrium level of GDP (Y*).
Now suppose that the full employment GDP = 30,000
The spending multiplier is equal to what?
What is the necessary change in government spending alone that is needed to get the economy to full employment?
The tax multiplier is equal to what?
What is the necessary change in taxes alone that is needed to get the economy to full employment?