What happens to equilibrium y if ig changes to 10

Reference no: EM13189898

ASSUME THAT THE CONSUMPTION SCHEDULE FOR A PRIVATE OPEN ECONOMY IS SUCH THAT CONSUMPTION C = 50 + 0.8Y. ASSUME FURTHER THAT PLANNED INVESTMENT Ig AND NET EXPROTS Xn ARE INDEPENDENT OF THE LEVEL OF REAL GDP AND CONSTANT AT Ig = 30 AND Xn = 10. RECALL ALSO THAT, IN EQUILIBRIUM, THE REAL OUTPUT PRODUCED (Y) IS EQUAL TO AGGREGATE EXPENDITURES: Y = C + Ig + Xn.
A. CALCULATE 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: EM13189898

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