Consider the following information for an economy (Note: No G or T):
C = 150 + 0.75Y + 0.02W,
I = 400, X = 150, IM = 0.03Y
where wealth, W = 800.
Calculate the equilibrium national income for this economy. Calculate the multiplier for the economy.
Suppose there is an economic growth in U.S., which results in an increase in exports to 400. How much does equilibrium national income change?
In response to the increase in X, how will the central bank react to bring the economy back to long-run equilibrium?