Calculate simplified expression for the consumption function

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Reference no: EM134023402

Problem

C line over head = 3.25 trillion I line over head = 1.30 trillion G line over head = 3.5 trillion T line over head = 3.0 trillion NX line over head = -1.00 trillion f line over head = 1 mpc = .75, d = 0.3, x = 0.1

1. Calculate simplified expressions for the consumption function, investment function, and the net export function.

2. Calculate an expression for the IS curve, Y in terms of r

3. Draw a graph of the IS curve and locate equilibrium output when the real interest rate = 2 as point A and equilibrium output when the real interest rate = 5 as point B.

4. Explain why equilibrium output is different at point B relative to point 1. Be specific. Get the instant assignment help.

5. Now suppose government purchases rise to $4.2 trillion (from $3.5 trillion), what will happen to equilibrium output when r = 2 (label as point C)? When r = 5 (label as point 4)

6. What is the government expenditure multiplier in this example and what does it depend on?

Reference no: EM134023402

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