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Suppose that for a particular economy and period, investment was equal to 100, government expenditure was equal to 75, net tax were fixed at 100, and consumption (C) was given by the consumption function C = 25 + 0.8YD where YD is disposable income and Y is GDP.
a. What is the level of equilibrium income(Y)?
b. What is value of the government expenditure multiplier (ΔY/ΔG)? Of the tax multiplier (ΔY/ΔT)?
c. Suppose that investment decline by 40 units to a level of 60. What will be the new level of equilibrium income?
Compute the real GDP per person for this nation in 2001, in 2000 euros per person. Round your answer to the nearest euro.
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