Macroeconomics 13th Edition by William Baumol ,Alan Blinder

Exercise 4

(More difficult) Keep everything the same as in Test Yourself Question 4 except change investment to I = $1,100. Use the equilibrium condition Y = C + I + G + ( X - IM ) to find the equilibrium level of GDP on the demand side. (In working out the answer, assume the price level is fixed.) Compare your answer to Table 3 and Figure₁0. Now compare your answer to the answer to Test Yourself Question 4. What do you learn about the multiplier
Table 3

Figure₁0

Reference Test Yourself Question 4.
(More difficult) 9 Consider an economy in which the consumption function takes the following simple algebraic form:
C = 300 + 0.75 DI
and in which investment ( I ) is always $900 and net exports are always -$100. Government purchases are fixed at $1,300 and axes are fixed at $1,200. Find the equilibrium level of GDP, and then compare your answer to Table₁ and Figure 2. ( Hint: Remember that disposable income is GDP minus taxes: DI = Y - T = Y - 1,200.)