board Aplia: Student Question × 2ctx-paulg3-00098quiz action-takeQuiz&quiz probG
ID: 1141012 • Letter: B
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board Aplia: Student Question × 2ctx-paulg3-00098quiz action-takeQuiz&quiz probGuid-Q4PLCOA8010100000042aeca30080000 same as in Test Yourself Question 4 except change investment to I -$1,100. Use the equilbrium condition Y=C+1+G + (X-IM) GDP on the demand side. the consumption function takes the following simple algebraic form: -300 orsr spending and total expenditure for each level of income, and then find the equilbrium level of GDP. (Hint: Remember that disposable income is minus taxes : D1 = Y-T Y-1 ,200 ) to find the equilibrium level of GDP on the demand side. Assume the price level is fixed. Remember from question 4 that 75DI. Using the following table, calculate the value of consumption GDP Consum Investment Government Spending Net Exports Total Expenditures 4,800 1,100 1,300 1,300 1300 -100 -100 -100 5.2001,100 5,600 6,000 6,400 6,800 7.200 1,100 1,100 1,100 1,100 1,100 100 1.300 1,300 1,300 -100 -100 100 The equilibrium value is the value found in the following table. Income Consumption Investment Government Purchases Net Exports Total Expenditure 4,800 5.200 5.600 6,000 6,400 6,800 7,200 3,000 3,300 3.600 3.900 4,200 4,600 4, 800 1.100 1,100 1,100 1,100 1,100 1,100 1.100 1,300 1,300 1.300 1.300 1,300 1,300 1.300 -100 -100 -100 -100 100 -100 -100 5,300 5,600 5,900 6.200 6.500 6.800 7.100Explanation / Answer
The table has been correctly filled.
Equilibrium value is 6800
at this point point, income is equal to total expenditure.
Multiplier= 1/(1-c)
c= .75
Multiplier= 1/(1-.75)= 4
Gdp increases by 4(200)= 800
An increase in investment of 200 lead to an increase in equilibrium gdp of 800, demonstrating a multiplier in this economy of 4.
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