Suppose the economy is determined by the tollowing consumption and investment eq

Question

Suppose the economy is determined by the tollowing consumption and investment equations. C-125 +0.8Y Lp 125 Suppose GDP (i.e. production) was not in equilibrium, but instead at 1750. Calculate the change in inventory that would occur this year. Inventory would rise by 200 Inventory would fall by 200 Inventory would rise by 100 Inventory would fall by 100 Albert invested an amount of $8000 1 answer Save Refer to the below The graph indica Question 5 (10 points) D If Y > AE, what will producers do in response to the change in inventories that would occur? Producers will increase output Producers will leave output unchanged 1 answer

Explanation / Answer

4)

Y = 125+0.8Y + 125

Y= 250 + 0.8Y

Y(1-0.8) = 250

Y = 250 / 0.2

= 1250

Current level 1750

Excess level = 1750 - 1250

= 500

Multiplier value = 1/0.2

= 5

Hence 100*5 = 500

Investory will fall by 100

5)

right answer is " No change in output"

Inventory of excess, hence it was reduced but it would not affect output level.

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