ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y

Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:

Y = C + Ig

Instructions: Enter your answers as whole numbers.

a. Calculate the equilibrium level of income or real GDP for this economy.

Equilibrium GDP (Y) = $
.

b. What happens to equilibrium GDP if Ig changes to 60?

Equilibrium GDP (Y) = $
.

What does this outcome reveal about the size of the spending multiplier?

Spending multiplier =
.