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Calculate the equilibrium level of income or real gdp

Assignment Help Macroeconomics
Reference no: EM131065906

Problem:

  • In the aggregate demand model in equilibrium, GDP (Y) = C + I + X (open economy).
  • Where C = consumption schedule = 100 + .75Y (consumption is a function of income).
  • Where I = planned investment = 20 and X = net exports = 40. Both are independent of GDP (Y).

Use the information provided above to complete the following:

  1. Calculate the equilibrium level of income or real GDP for this economy.
  2. What happens to equilibrium Y if Ig changes to 15?
  3. What does this outcome reveal about the size of the multiplier?
  4. Can there be equilibrium level of output at below full employment?

Reference no: EM131065906

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