3. (1.5 marks) Consider an economy in which the consumption function takes the following algebraic form: C= 100+ 0.7Y And in which Investment (I) is 700. a) Find the equilibrium level of GDP from the requirement that Y=C+I b) Suppose investment rises to 900, what would be the equilibrium level of GDP? c) What is the change in GDP? d) What is the value of the multiplier?

3. (1.5 marks) Consider an economy in which the consumption function takes the following algebraic form: C= 100+ 0.7Y And in which Investment (I) is 700. a) Find the equilibrium level of GDP from the requirement that Y=C+I b) Suppose investment rises to 900, what would be the equilibrium level of GDP? c) What is the change in GDP? d) What is the value of the multiplier?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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