Homework Answers
Answer
a)
Y=200+0.9Y+300
Y-0.9Y=500
0.1Y=500
Y=5000
The equilibrium income is 5000
=======
b)
Investment multiplier =1/ (1-MPC)
MPC=coefficient of Y in the C function as it is the portion of income consumed for an extra dollar of income
MPC=0.9
Multiplier =1/ (1-0.9)
=10.0
c)
Change in Y=change in investment * multiplier
=10*10
=$100
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