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Problem:

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

Required:

problem 1: Compute the equilibrium level of income

problem 2: If Government spending rises  from 100 to 300, compute the new equilibrium

problem 3: Compute the value of multiplier.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M910504

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