Answer to Question #132243 in Macroeconomics for ben

Question

Given the following model:

Consumption: C = 500 + 0.5Yd

 Investment: I = 250

Government Expenditure: G = 100

Proportional Tax Rate: t = 0.1

Imports: M = 0.25Y

Exports: X = 50

(Note: There is no lump-sum tax)

1. a) If the current level of output is 1000, what is the level of actual investment? (2 marks)
2. b) Calculate the equilibrium real GDP (2 marks)

Answer 1

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