What does outcome reveal about the size of the multiplier

Reference no: EM13232316

Assume that the consumption schedule for a private open economy is such that consumption is as follows:
C = 50 + 0.9 Y

Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at:
Ig = 30
Xn = 10
Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn.

a. What is the equilibrium level of income or real GDP for this economy?

b. What happens to equilibrium Y if Ig changes to 10 ?

What does this outcome reveal about the size of the multiplier?

Reference no: EM13232316

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