-Refer to Table 11.5. If G increases to 400 (all other components constant) , then the equilibrium income in this economy increases by:

Question

-Refer to Table 11.5. If G increases to 400 (all other components constant), then the equilibrium income in this economy increases by:

Quizplus · Accepted Answer

The multiplier in this economy is 2. Therefore, the increase in G by 100 (from 300 to 400) will lead to an increase in equilibrium income by 2 x 100 = 200. Therefore, the new equilibrium income will be 800 (400 + 400). Thus, the increase in equilibrium income is 400 (800 - 400).