If C=a±bYd, a=150, b=0.85, yd = Y-T, T=tY, t=20%, and 1=90, G=250, and Xn=EX-IM, EX=400,...

Question

If C=a±bYd, a=150, b=0.85, yd = Y-T, T=tY, t=20%, and 1=90, G=250, and Xn=EX-IM, EX=400, IM=150+.10Y, what is the equilibrium level of GDP for Falconland?
B) What is the numerical value of the multiplier?
C) How much bigger or smaller would GDP be if households decided to spend 150 more (i.e. a increases)?
2] (opts) Does Rocketland have a budget surplus or deficit under either scenario (you must show your work)?

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David · Accepted Answer

Question
a.
Y =C+I+G+X-M
=150+.85(Y-.2Y) +90+250+400-150-.1Y
=740+.58Y
Or Y=740/(1-.58)=740/.42=1761.9
b. 
the multiplier is 1/(.42)= 2.3809
c.
if a rises we have 
=300+.85(Y-.2Y) +90+250+400-150-.1Y
=890+.58Y
Y=890/.42 =2119.0476
Data for Rocketland is missing

If C=a±bYd, a=150, b=0.85, yd = Y-T, T=tY, t=20%, and 1=90, G=250, and Xn=EX-IM, EX=400, IM=150+.10Y, what is the equilibrium level of GDP for Falconland? B) What is the numerical value of the...

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