# My question is on ‘part b’ below. I’m wondering if i picked the right numbers for income change and

My question is on ‘part b’ below. I’m wondering if i picked the right numbers for income change and
multiplier. thanks!
1. Suppose the United States economy is represented by the following equations:
Z = C + I + G ; C = 500 + .5YD ; T = 600; I = 300;
YD = Y – T ; G = 2000
a. Given the above variables, calculate the equilibrium level of output.
Y = C+I+G
= 500 + .5(Y-600) + 300 + 2000
=2500 + .5Y
.5Y = 2500
Y = 5,000
Equilibrium level of output is 5,000
b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
= 500 + .5(Y-600) + 300 + 1900
=2400 + .5Y
.5Y = 2400
Y = 4,800
Equilibrium level of output is 4,800
Income changes by 200
Multiplier is .5

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