Homework Answers
ANswe:
Given
C=100+0.9Y
I=500
So
A) at Equilibrium Y=C+I
Y=100+0.9Y+500
Y=$6000
B)
If Investment falls by 100 then New I =500-100=400
New Equilibrium Y=C+I
Y=100+0.9Y+400
Y=5000
So Equilibrium level of output falls by 6000-5000=$1000
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