Suppose autonomous consumption is $500, government spending $1,000, panned inves
ID: 1194839 • Letter: S
Question
Suppose autonomous consumption is $500, government spending $1,000, panned investment is $1,250, and net exports are -$250 and the MPC is 0.8. What is the equilibrium value GDP? Suppose autonomous consumption is $500, government spending $1,000, panned investment is $1,250, and net exports are -$250 and the MPC is 0.8. What is the equilibrium value GDP? Suppose autonomous consumption is $500, government spending $1,000, panned investment is $1,250, and net exports are -$250 and the MPC is 0.8. What is the equilibrium value GDP?Explanation / Answer
Y = C + I + G + (X-M) = GDP
Consumption Function: C= a + (MPC)*Y
Y = a + (MPC)*Y + I + G + (X-M)
Y – (MPC)*Y = a + I + G + (X-M)
Y*(1 – MPC) = a + I + G + (X-M)
a + I + G + (X-M) = Autonomous E
Y = (Autonomous E)/(1-MPC)
DY = D(Auto E)/(1-MPC)