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Calculate the government expenditure multiplier

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Reference no: EM13337270

With reference to the simple closed economy income-expenditure model,suppose the aggregate consumption function is C = 100 +0.8(Y – T); taxes areT = 10 + 0.25Y; investment, I, is 300 and government expenditures, G, are 200.

(a) Calculate equilibrium income, consumption and the government budgetsurplus.

(b) Calculate the level of income that equates taxes to governmentexpenditures.

(c) Calculate the government expenditure multiplier.

Reference no: EM13337270

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