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What is the equilibrium level of gdp

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Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment, I = $5 trillion; government spending G = $3 trillion; Taxes are proportional to GDP with t=0.10 (Thus total taxes will be equal to t multiplied by Y); the consumption function, C(Y-T)= $4 trillion + 0.8((1-t)Y); EX= $4 trillion; and IM= $2 trilliion +0.06Y.

a. What is the equilibrium level of GDP?

b. At the equilibirum level of GDP: What is total consumption in the economy?

c. At the equilibrium level of GDP: What is total savings in the economy?

d. What is the government spending multiplier? (Hint: Consider a $1 trillion dollar increase in GDP)

e. Is there a trade deficit or a trade surplus? How large is it?

Reference no: EM133124047

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