Assume we have an economy where the Price Level is constant. We can describe that economy with the following equations (below).
|C = 0.8(DI) + 2000||C = Consumption Expenditure, DI = Disposable Income|
|I = 1000||I = Investment Expenditure|
|G = 1200||G = Government Expenditure|
|X = 500||X = Expenditure on Exports|
|M = 500||M = Expenditure on Imports|
|T = 1000||T = Tax Revenue|
|DI = Y - T|
a. What is equilibrium GDP in this economy?
b. How does equilibrium GDP change if Investment Expenditure increases by 1000?
c. How does equilibrium GDP change if Government Expenditure increases by 1000?
d. How does equilibrium GDP change if Tax Revenues increase by 1000?