Illustrate what was the value of the government expenditure

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Reference no: EM1365220

Suppose that for a particular economy, for some time period, investment was equal to $100, government expenditure was equal $75, net taxes were fixed at $100, and consumption was given by the consumption function , where is disposable income and Y is GDP.

(a) What was the level of equilibrium income (Y),

(b) What was the value of the government expenditure multiplier,

(d) Suppose that investment declined by $40 to a level of $60. What will be the new level of equilibrium income?

Reference no: EM1365220

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