You Are Given the Following Information on the Macroeconomy: Consumption

question 10

Essay

You are given the following information on the macroeconomy: Consumption: 200 + 0.75Y
Investment: 100 + 0.10Y
Government Spending 500
Exports 100
Imports 50 + 0.25Y
Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million.

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Definitions:

Callable Bonds

Bonds that the issuer has the right to redeem before their maturity date at a predetermined price.

Fiscal Year

A 12-month period used for bookkeeping, financial reporting, and tax purposes, which may not coincide with the calendar year.

Interest Payable

The amount of interest expense that has been incurred but not yet paid by a company on its borrowings.

Callable Bonds

Bonds that can be redeemed by the issuer before their maturity date at a predefined call price.