What is the mpc and mps in the economy

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Reference no: EM13246374

Assume an economy can be described by thefollowing equations. (Keynesian model)

C = 300 + 0.8Y

I = 100

G = 200

(X - IM) = 50

a. What is the MPS in this economy?

b. What is the MPC in this economy?

c. What is the multiplier?

d. Calculate the equilibrium level of Y.

e. Suppose that full employment equilibrium willoccur at Y = 4000. What kind of gap exists?

f. How much will government purchases have toincrease or decrease to reach full employment equilibrium?

g. How much will taxes have to be cut orincreased to achieve full employment equilibrium?

h. Suppose that the AS curve is upward sloping.Will the change in government purchases or the change in taxes you haverecommended above move the economy to an output level of 4000?

Reference no: EM13246374

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