Compute the equilibrium level of income-size of multiplier

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Reference no: EM13981438

A) You are given the following information on the macro economy:

Consumption: 200 + 0.75Y

Investment: 100 + 0.10Y

Government Spending 500

Exports 100

Imports 50 + 0.25Y

Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million.

B) Suppose the entire economy contains $5000 worth of one-dollar bills.

-If people fail to deposit any of the dollars but instead hold all $5000 as currency, how large is the money supply?

-If people deposit the entire $5000 worth of bills in banks that are required to observe a 100% reserve requirement, how large is the money supply?

-If people deposit the entire $5000 worth of bills in banks that are required to observe a 20% reserve requirement, how large is the money supply?

C) You are given the following information on the banking system.

Reserve requirement rr = 0.08

Currency-deposit ratio c = 0.10

Excess reserve ratio e = 0.05

Compute the simple deposit and money multipliers.

Reference no: EM13981438

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