1.Using the multiplier. Consider the following economy (similar to the one described iN Worksheet 1): C = 160 + 0.6Y
D
I = 150 G = 150 T = 100
a.
Consider a decline in real GDP of 2%.
How many units of real GDP equal 2% of equilibrium GDP?
b.
If the 2% decline in real GDP were caused by a reduc tion in I, how many units would I fall?
c.
If the government wanted to return real GDP to its equilibrium level after the fall in I, would it increase or decrease G?
By how many units wo uld it increase or decrease G?