Assume an economy is represented by the following: C = 240 +0.6Yd I = 400 G = 2000 T = 2000 a. Calculate the equilibrium

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Assume An Economy Is Represented By The Following C 240 0 6yd I 400 G 2000 T 2000 A Calculate The Equilibrium 1 (392.68 KiB) Viewed 40 times

Assume an economy is represented by the following: C = 240 +0.6Yd I = 400 G = 2000 T = 2000 a. Calculate the equilibrium level of output. (3 marks) b. Calculate the levels of consumption and saving that occur when the economy is in equilibrium. (5 marks) c. Suppose the government increases it expenditure to 3500 i. Explain an expansionary fiscal policy and the crowding out effect. ii. Calculate the new equilibrium level of income. iii. Given your answer, explain the size of the spending multiplier? d. Graphically illustrate using the AE - Y graph the equilibrium income points. (5 marks) (4 marks) (3 marks) (5 marks)