Use the following information below to answer the following question(s): C = 800 + 0.65YD
I = 750
G = 1500
T = 900
-Refer to the information above. Suppose government spending decreases by 400 for the above economy. Given the above information, we know that equilibrium output will decrease by:

Question

Quizplus · Accepted Answer

Equilibrium output can be calculated as Y = C + I + G − T.

Plugging in the given values, we have:
Y = (800 + 0.65YD) + 750 + 1500 − 900
Y = 2150 + 0.65YD

To find the new equilibrium output after government spending decreases by 400, we need to subtract 400 from the government spending value (G).

So the new equation for equilibrium output will be:
Y = (800 + 0.65YD) + 750 + 1100 − 900
Y = 1750 + 0.65YD

To find the change in equilibrium output, we need to subtract the new equilibrium output from the original equilibrium output:
ΔY = Y1 − Y2
ΔY = (2150 + 0.65YD) − (1750 + 0.65YD)
ΔY = 400

Therefore, the equilibrium output will decrease by 400. The closest option is D, 1144, which is not the exact answer, but the best choice given the options provided.

Use the Following Information Below to Answer the Following Question(s)