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Question 1

Consider the following information for Mexico.

Autonomous Consumption450
MPC0.6
Tax Rate0.25
Investment1000
Government Expenditure100
Exports40
MPI0.05

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

 

Hint




Question 2

Suppose that there is a decrease in Exports by $50.

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

 

Hint




Question 3

What is the difference between the original and new GDP as a result of a decrease in Exports?

 

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