# Consider the imaginary small country of Kootenay. Assume that Kootena.pdf

31 de Mar de 2023
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### Consider the imaginary small country of Kootenay. Assume that Kootena.pdf

• 1. Consider the imaginary small country of Kootenay. Assume that Kootenay is closed to trade, so that its net exports are equal to zero. Suppose that th economy is described by the following consumption function, where C is consumption, Y is income (real GDP), IP is planned investment, G is government purchases, and T is taxes: C=\$15billion+0.75(YT) Suppose G=\$90 billion, IP=\$60 billion, and T=\$20 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y=C+IP+G, the equilibrium income level is billion. Suppose that government purchases are increased by \$50 billion. The new equilibrium level of income will be equal to billion. Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to