**My question is on ‘part b’ below. I’m wondering if i picked the right numbers for income change and**

** multiplier. thanks! **

1. Suppose the United States economy is represented by the following equations:

Z = C + I + G ; C = 500 + .5YD ; T = 600; I = 300;

YD = Y – T ; G = 2000

a. Given the above variables, calculate the equilibrium level of output.

**Y = C+I+G**

**= 500 + .5(Y-600) + 300 + 2000**

**=2500 + .5Y**

**.5Y = 2500**

**Y = 5,000**

**Equilibrium level of output is 5,000**

b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?

**Y = C+I+G**

**= 500 + .5(Y-600) + 300 + 1900**

**=2400 + .5Y**

**.5Y = 2400**

**Y = 4,800**

**Equilibrium level of output is 4,800**

**Income changes by 200**

**Multiplier is .5**