Question
Suppose that we are in an economy with trade, the government, domestic consumption, and investment. The government currently begins collecting no taxes (a tax rate
Suppose that we are in an economy with trade, the government, domestic consumption, and investment. The government currently begins collecting no taxes (a tax rate of 0%). Suppose that this economy begins with a National Income: Y = $7,000. At this level of income, the desired quantities of Consumption (C), Government Spending (G), Investment (I), Exports (X) and Imports (Im) are the following: = 6,000 = 2,000 = 2,000 = 1,000 = 2,000 Now suppose that National Income decreases to Y = $5,000, and we observe the following: = 4,400 = 2,000 = 2,000 = 1,000 = 1,800
What is this economy's equilibrium level of National Income (Y)? [2 points]
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