An economy is characterized by the following desired consumption and investment functions: C = 543 + 0.72Y and I = 752. Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for the multiplier to 3 decimal places. Example: 0.001 Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired consumption. What is the new equilibrium GDP level for the economy? Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function graphically. Part (d): Suppose the desired investment levels returns to I = 752, but now consumers spend 86 cents of every dollar earned. What is the new equilibrium GDP level for the economy? Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function graphically.

An economy is characterized by the following desired consumption and investment functions: C = 543 + 0.72Y and I = 752. Part (a): Calculate the equilibrium level of GDP and the multiplier for this economy. Round your answer for the multiplier to 3 decimal places. Example: 0.001 Part (b): Suppose the level of desired investment changed to I = 731, with no change to desired consumption. What is the new equilibrium GDP level for the economy? Part (c): Using 1 to 2 sentences, describe how this change to desired investment affects the AE function graphically. Part (d): Suppose the desired investment levels returns to I = 752, but now consumers spend 86 cents of every dollar earned. What is the new equilibrium GDP level for the economy? Part (e): Using 1 to 2 sentences, describe how this change to consumption habits affects the AE function graphically.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 5TY

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