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What is the value of the spending multiplier

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Reference no: EM132817805

Given the following for the economy of a country

Consumption function: C=90+0.75Yd.

Government spending: G=100.
Investment function: I=75.
Net export: NX=50.
Net taxes: T=50.
Disposable income: YdY-T.
Equilibrium: Y=C+I+G+NX.

Problem a. Solve for equilibrium income. Show your work below.

Problem b. If autonomous investment decreases by 60, what is the new level of income? Show your answer on the same graph. Show your work below.

Problem c. What is the value of the spending multiplier? Show your work below.

Reference no: EM132817805

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