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Math Help - Income-Expenditure help please

  1. #1
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    cali
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    Income-Expenditure help please

    Hello Everyone!! Having some trouble with this question as well just want to double check...thank you!

    C = 150 + 0.7DI
    I = 100
    G = 130
    X = 200
    M = 240
    Taxes = 100
    Transfers = 40

    1) What is the equilibrium real GDP?
    I got (993.33, 298) or AE = .7y + 298 and y* = 993.33

    2) Is there a government surplus or deficit?
    I got NT = 60, G = 130 => Defecit = 70

    3) Suppose taxes increase by 20. Use the multiplier to find the new equilibrium level of real GDP:
    I got (ΔNT) (-MPC/1-MPC) => (20) (-.7/.3) = 46.67


    Do all of these look correct I would appreciate any feedback thank you!
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  2. #2
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    Joined
    May 2013
    From
    cali
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    Re: Income-Expenditure help please

    To add on to my 3rd step there. I finally got the new equilibrium to be (946.66, 278), since the demand curve will shift DOWN by 20 and the equilibrium will move down by 46.67 considering 46.67 is negative. Can anyone confirm this?
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