I need to know the answer and how you got it - Thanks! Use the following informa

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I need to know the answer and how you got it - Thanks!

Use the following information to answer questions 8 - 10: Equilibrium is at income (real GDP) equal to In this instance, the MPS is the government spending multiplier is and the tax multiplier is If government spending increases from $500 billion to $550 billion, then equilibrium income (real GDP) will: increase by $500 billion to $15,500. increase by $500 billion to $ 15 000 only increases if taxes also increase from $500 billion to $550 billion. only increases if taxes decrease by the same amount.

Explanation / Answer

q8)

balancing the equation involving the variables ,

total value of output Y= C (CONSUMPTION)+I (INVESTEMENTS)+G (GOVERNMENTSPENDING)

C= 600+0.9Yd = 600+0.9(Y-T) BECAUSE Yd IS THE DISAPOSAQBLE INCOME AFTER TAX REDUCTION

THEREFORE calculating value of Y

600+0.9(Y-500)+850+500=Y ,

Y= $15000 billion.

q9)

MPS= 1- MARGINAL PROPENSITY TO CONSUME WHICH IS EQUAL TO 0.9

THEREFORE MPS= 1-0.9=0.1

government spending multip[lier will be 1/(1-b) where b is MPC : multiplier= 1/0.1= 10

tax multiplier will be -b/(1-b) which can be calcluated by diffrentiating equilibrium equation of y with respecty to T

multiplier for Tx= -0.9/(1-0.9)= -9

Q10)

VIA THE MULTPLIER EFEECT OF 10 AN INCREASE IN THE GOVERNMENT SPENDING BY $50 BILLION WILL INCREASE THE INCOME BY 500 TO REACH TO $15500 BILLION

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