B-Chapter-3-QC-7 (Page: 83)-cont.
{"Image DocumentName": "B-Chapter-3-QC-7 (Page: 83)-cont.", "Image ImageDescription": "7. a. Suppose the economy is characterized by the following behavioral equations: C = c0 + c1YD YD = Y \u2013 T I = b0 + b1Y Government spending and taxes are constant. Note that investment now increases with output. (Chapter 5 discusses the reasons for this relation.) Solve for equilibrium output. b. What is the value of the multiplier? How does the relation between investment and output affect the value of the multiplier? For the multiplier to be positive, what condition must (c1 + b1) satisfy? Explain your answers. c. Suppose that the paramater b0, sometimes called business confidence, increases. How will equilibrium output be affected? Will investment change by more or less than the change in b0? Why? What will happen to national saving?", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}