Suppose C = 100 + 0.6(Y - T)and T = 0.25Y,I = 150,G = 250 and NX = 50.An increase in government purchases of goods and services from G = 250 to G = 265 will result in an increase in Y (GDP)of

Question

Quizplus · Accepted Answer

We begin by using the formula for GDP(Y):
Y = C + I + G + NX
Substituting the given values, we get:
Y = (100 + 0.6(Y - 0.25Y)) + 150 + 250 + 50
Simplifying the equation, we get:
Y = 900 + 0.35Y
0.65Y = 900
Y ≈ 1384.6

Now, we need to find the change in Y when G increases from 250 to 265:
ΔY = 0.6(ΔG)
ΔY = 0.6(265 - 250)
ΔY = 0.6(15)
ΔY = 9
Therefore, an increase in government purchases of goods and services from G = 250 to G = 265 will result in an increase in Y (GDP) of 9. Thus, the best choice is C.