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You have the following information about an economy: Autonomous consumption: $90bn Autonomous investments: $30bn Autonomous government spending: $40bn Autonomous export: $25bn Marginal propensity to save:
You have the following information about an economy: Autonomous consumption: $90bn Autonomous investments: $30bn Autonomous government spending: $40bn Autonomous export: $25bn Marginal propensity to save: 35% Tax rate: 40% Marginal propensity to import: 15% a) Solve for aggregate expenditure as a function of Y. b) In the short run if Keynesian policy works, what would be the equilibrium level of real GDP? c) If investment decreases by $20bn, how much will the real output change?
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