Equations for C, I, G, and NX are given below.If the equilibrium level of GDP is $32,000, what will the new equilibrium level of GDP be if government spending increases to 2,000? C = 5,000 + (MPC)Y
I = 1,500
G = 2,000
NX = -500
A)$32,500
B)$34,000
C)$38,000
D)$42,000
E)Not enough information is given to answer the question.

Question

Quizplus · Accepted Answer

The equilibrium level of GDP is given by the formula:
Y = C + I + G + NX
Substituting the values given, we get:
32,000 = 5,000 + (MPC)Y + 1,500 + 2,000 - 500
Simplifying the expression, we get:
MPC = 0.8
Substituting the new value for G, we get:
Y = 5,000 + 0.8Y + 1,500 + 2,000 - 500
Solving for Y, we get:
Y = $34,000

Equations for C, I, G, and NX Are Given Below