Assume that the consumption schedule for a private closed economy is such that consumption is:

C = 100 + 0.75Y

Assume further that planned investment I_g is independent of the level of real GDP and constant at I_g = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:

Y = C + I_g

Instructions: Enter your answers as whole numbers. a. Calculate the equilibrium level of income or real GDP for this economy.

Equilibrium GDP (Y) = $ .

b. What happens to equilibrium GDP if I_g changes to 60?

Equilibrium GDP (Y) = $ .

What does this outcome reveal about the size of the spending multiplier?

Spending multiplier = .