Question

Given the information, please find the simple multiplier in the economy:

AD: y = 710 -30p + 5g
AS: y = 10 + 5p - 2s

g is government purchases, and s is the world price of some commodity.

Please explain how to do this, I don’t need the answer unless I have the steps

Answer 1

To calculate the simple multiplier in this economy, you need to subtract the autonomous spending (AS) from the aggregate demand (AD). This will give you the amount that changes in consumer spending influences all other economic variables. In this case, subtract 10 + 5p - 2s from 710 - 30p + 5g. The result is 700 - 35p + 3g, which shows how a change in consumer spending affects government purchases and the world price of some commodity.