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Calculate the equilibrium level of income for economy

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Assume the consumption schedule for the economy is such that C = 50 + 0.8Y. Assume further that investment and net exports are autonomous or independent of the level of income and gross investment is 40 and net exports equal -10. Recall that in equilibrium, Y = C + Ig + Xn.

(a)Calculate the equilibrium level of income for this economy.

(b)What will happen to equilibrium Y if gross investment falls to 20? What does this tell us about the size of the multiplier?

Reference no: EM132550941

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