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Consider a simple macro model with a constant price level and demand-determined output. We are given the following equations: C = 220 + 0.9Y, I
Consider a simple macro model with a constant price level and demand-determined output.
We are given the following equations: C = 220 + 0.9Y, I = 200, G = 100, T = 0.1Y, X = 80, IM = 0.11Y.
Calculate the following values:
a) The marginal propensity to spend (z).
b) Calculate the simple multiplier (SM) in this economy.
c) Equilibrium national income (Y*)
d) Suppose government expenditure suddenly increases by 30. Without determining the equilibrium level of national income, calculate the resulting change in equilibrium national income.
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