If C=50 + 0.8Y, & I = 50, find the following
i) Equilibrium value of Y,
ii) Value of Simple Keynesian autonomous investment multiplier,
iii) New equilibrium value of Y if I is increased by 10 units.
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Answer:
equilibrium is a situation when
Y=C+I
Explanation:
Y=50+.8Y+50
.2Y=100
Y=100/.2
Y=500
(ii) investment multiplier= change in income/change in investment
=400/50=8 times
(iii Y= 50+.8Y+60
Y=110+.8Y
.2y=110
Y=110/.2 =550
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