Question #71575

consider a hypothetical economy where autonomous C ,autonomous I,autonomous G,autonomous TR ,mpc and t iss given
calculate the level of autonomuous expenditure,equilibrium income,consumption ,total taxes and multiplier

Expert's answer

If we know autonomous C (C0), autonomous I (I0), autonomous G (G0), autonomous TR (TR0), mpc and t, then:

Autonomous expenditure AE0 = C0 + I0 + G0,

equilibrium income Y = C + I + G,

consumption C = C0 + mpc*Y,

total taxes T = t*Y,

multiplier m = 1/mpc.

Autonomous expenditure AE0 = C0 + I0 + G0,

equilibrium income Y = C + I + G,

consumption C = C0 + mpc*Y,

total taxes T = t*Y,

multiplier m = 1/mpc.

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