You Are Given the Following Information About an Economy: C

Essay

You are given the following information about an economy: C = 200 + .75Yd; I = 50; G = 100; EX = 25; IM = .15Yd; and T = 60.
(a) What is the equilibrium level of income?
(b) At the equilibrium level of income is the economy running a trade deficit or trade surplus? What is the amount of the trade deficit or surplus?
(c) What is the open-economy multiplier?
(d) If government spending increases by 100, what will be the change in income? What is the new equilibrium level of income?
(e) At the new equilibrium level of income, what is the level of imports and exports?