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Calculate the equilibrium consumption in the economy

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Assume that the Keynesian multiplier in the Jamaican economy is 2, the equilibrium GDP is $5,400 million, and the tax rate (t) = 20%. Consumption (C), taxation (T) and disposable income (Yd) are given as follows:

C = 800 + 0.8Yd

T = tY

Yd = Y - T

Y=C + I + G = 800 + 0.8 Y

i) Assume government expenditure (G) = $820 million, calculate the equilibrium consumption in the economy.

Reference no: EM132506466

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