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Question 1

Consider the following infomation for Japan.

Autonomous Consumption170
MPC0.6
Tax Rate0.25
Investment500
Government Expenditure200
Exports40
MPI0.4

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 $20.

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