1 assume that all expenditure is summarized in the

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Reference no: EM13377173

1. Assume that all expenditure is summarized in the following consumption and investment functions:

C = $200 billion + 0.8 YD

I = $200 billion

Use this information to complete this problem:

a.Identify the equilibrium rate of output (or GDP) .

b.If full-employment GDP equals $2500 billion ,what kind of Gap will develop (recessionary or Inflationary )

c.How much is the gap ?

d.What is the value of the multiplier?

e.What would happen to equilibrium GDP if the rate of investment increased to $250 from current $200 billion per year?

f. If net exports go up by $20 billion what would happen to Equilibrium GDP?

Reference no: EM13377173

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