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Keynesian spending multiplier in this economy

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Reference no: EM131974607

AE = C + I + G + (X-M)

C = 700 + .75(Y - T) - 30 (r)

I = 500 - 50(r) 

G = 250

X- M = -25

T = 80

r = 5

Price level P is fixed at 1 (P=1)

Suppose the Consumption function changes to C=600 +.75(Y-T) - 30(r).

1) The new value of equilibrium output is =

2) The new value of equilibrium consumption is=

3) The Consumption function is still C=600 +.75(Y-T) - 30(r). The Keynesian spending multiplier in this economy =

Reference no: EM131974607

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