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Consider the goods market of the following closed economy - the economy is not necessarily in equilibrium: C = 440 + .
5. Consider the goods market of the following closed economy – the economy is not necessarily in equilibrium:
C = 440 + .8(Yd) (C is Consumption, Yd is disposable income)
I = 500 (I is Investment), G = 300 (G is Government Expenditure) T = 300 (T is Taxes) X = M = 0.
What is the expression/equation for aggregate demand (Z)?
What is the equilibrium equation in the goods market?
Solve for the equilibrium output Y.
What is the value of the multiplier?
Now, let Government spending increase by 100. What is the new equilibrium income?
