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Use data below to answer the following questions: C = 0.8 Y I = 600 G = 150 Consider the income-expenditure identity in a closed economy, Y = C + I +...
Use data below to answer the following questions:
C = 0.8 Y
I = 600
G = 150
Consider the income-expenditure identity in a closed economy, Y = C + I + G. Suppose consumption is always a fraction (mpc) of income such that C = mpc * Y.
1. What is the value of Y? ____________
2. If G increases to 200, with I remaining constant, what is the new value of Y?____________
3. What is the ratio 1/(1-mpc)? __________