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Suppose the consumption expenditure is C = $100 billion + 0.9*Y. Investment (I) is $100 billion, government spending (G) is $50 billion and exports (X) are $100 billion. Imports depend on the level of income as follows: M = 0.1*Y.
a) Calculate the equilibrium level of income for this economy! What is the value of multiplier?
b) Suppose the marginal propensity to consume (MPC) decreases to 0.8. How would this affect the equilibrium in the economy?
c) What would be the effect on the multiplier if in addition to the change in b), the import function becomes M = 0.15*Y (i.e. people now spend a bigger share of their income on imports)?
What does the price elasticity of demand measure? what is the absolute value of the short-run elasticity of demand for bread has been estimated to be 0.15. Its long-run elasticity of demand.
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consider a market characterized by the following demand and supply conditions px 15 - 2qx and px 3 2qx. the
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If the following products had an exercise tax placed on them, who (buyers or sellers) would pay the tax and why? Explain the economics concepts involved.
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