Business, 27.11.2019 21:31 saladdressing1425

Consider planned aggregate expenditure model: planned investment, i = $50 billion; government spending g = $50 billion; taxes are equal to $50 billion; the consumption function, c(y-t)= $100 billion + 0.80(y-t). a. what is the equilibrium level of output? b. if output in the economy started at $900 billion, what would happen to inventories and output? c. at the equilibrium level of output: what are total consumption and savings? d. if taxes decreased to $25 billion, what would be the new level of equilibrium output? calculate the tax multiplier? e. if taxes stayed at $50 billion and spending increased to $75 billion, what would be the new level of equilibrium output? calculate the government spending multiplier? f. how would your answers change to a, d, and e if the consumption function were instead c(y-t)= $140 billion + 0.60(y-t).

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