value: 1.00 points An economy is described by the following equations: = 1,800 +

Question

value: 1.00 points An economy is described by the following equations: = 1,800 + 0.8 (Y- = 1000 1P 2,000 = 200 = 2,000 = 9,000 NX The multipier for this economy is 5. Find the effect on short-run equilibrium output of: a. An Increase in government purchases by 50 from 2,000 to 2,050. Instruction: Enter your response as an integer value. Short-run equilibrium output will (Click to select) to b, A decrease in tax collections from 2,000 to 1,950 (leaving government purchases at their original value of 2000). Instruction: Enter your response as an integer value Short-run equilibrium output will (Click to select) c A decrease in planned investment spending by 50 from 1,000 to 95(leaving government purchases and taxes unchanged at their n anal values of 200 Instruction: Enter your response as an integer value. Short-run equilibrium output will (Click to select) to -O to

Explanation / Answer

Y = C + I + G + NX

Y = 1800 + 0.8(Y - 2000) + 1000 + 2000 + 200

Y = 5000 + 0.8Y - 1600

0.2Y = 3400

Y = $ 17000

a) Change in Y = Change in G x Multiplier = 50 x 5 = $ 250

So, equilibrium output increases by $ 250.

Equilibrium output increases to $ 17000 + 250 = $ 17,250

b) Change in Y = - Change in Taxes x Multiplier = - (-50) x 5 = $ 250

Equilibrium output increases by $ 250.

Equilibrium output increases to $ 17000 + 250 = $ 17,250

c) Change in Y = Change in Investment x Multiplier = 50 x 5 = $ 250

Equilibrium output increases by $ 250

Equilibrium output increases to $ 17000 + 250 = $ 17,250

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