Answer Happy

A simple macroeconomic system is described below. Assuming the system follows the aggregate expenditures model, please answer the questions that follow. C = consumption expenditure C = Co+cYd Co=660 Co = autonomous consumption expenditure c = 0.6 c = marginal propensity to consume (MPC) Yd disposable income Yd=Y-NT NT=tY NT = net taxes t = 0.2 t = tax rate 0 = 110 lo = investment expenditure Go = 540 Go government expenditure Xo = 60 Xo = exports IM = IMO + mY IM = imports IMo = 310 IMo = autonomous imports m = 0.15 m = marginal propensity to import (MPM) Y = real GDP/income a) Calculate the equilibrium level of income. Keep as much precision as possible during your calculations. Your final answer should be accurate to the nearest dollar. Equilibrium = $0 b) What is the multiplier for government expenditures? That is, increasing government expenditures by $1 increases the equilibrium level of income by how much? Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. Government Multiplier = 0 c) Suppose that the potential income for this economy is $2,322. What change in government spending would eliminate this gap and bring the economy back to equilibrium? Keep as much precision as possible during your calculations. Your final answer should be accurate to the nearest dollar. Government Change = $0