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Suppose an economy is represented by the following equations: C = 200 + 0.25 Yd I = 150 + 0.25 Y - 1000i G =
Suppose an economy is represented by the following equations:
C = 200 + 0.25 Yd
I = 150 + 0.25 Y - 1000i G = 250
T = 200
i = 5% = 0.05
- (a)Derive the IS relation. Solve for the equilibrium output Y.
- (b)What is the multiplier for this economy?
- (c)Assume that government purchases (G) decrease to 200. What is the new equilibrium level of output? How much does income change as a result of this event?
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Macroeconomics
Authors: Charles I. Jones
3rd edition
978-0393123944, 393123944, 393923908, 978-0393923902
