The MPC for a closed economy is 0.75. Autonomous consumption is $500, investment is $300, and government spending is $400.
a) What is the equilibrium level of real GDP?
b) If business increases planned investment expenditure by 300 to 400, what is the new equilibrium real GDP?
c) What is the slope of the AE function in this economy and the value of the multiplier?
the equilibrium GDP is at
The consumption function is the form of
using values and equations
the equilibrium GDP is $4800
I=400 instead of 300
the new equilibrium GDP is $5200
the AE funtion is
the slope of AE funtion is 0.75
the multiplier is 4.
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