Solved: Suppose that government purchases are reduced by 100, Business Economics

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Suppose that government purchases are reduced by 100

C = 40+0.5×(Y - T)

G=$215 billion, IP=$50 billion and T=$10 billion.

Y=C+IP+G

What is the equilibrium income level?

Suppose that government purchases are reduced by $100 billion. What is the new equilibrium level of income?

Based on the effect of the change in government purchases on equilibrium income, what is this economy's multiplier equal to?

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Business Economics: Suppose that government purchases are reduced by 100

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Business Economics: Suppose that government purchases are reduced by 100

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