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Question 1

Consider the following infomation for Canada.

Autonomous Consumption470
MPC0.6
Tax Rate0.4
Investment800
Government Expenditure300
Exports10
MPI0.25

What is the equilibrium level of GDP in the income-expenditure model?

 

Hint




Question 2

Suppose that there is an increase in Autonomous Consumption by $10.

What is the new equilibrium level of GDP in the income-expenditure model?

 

Hint




Question 3

What is difference between the original and new level of GDP as a result of an increase in Autonomous Consumption?

 

Hint