Let C is equal to 20+0.8 Yd, I is equal to 50, G is equal to 20, t is equal to 10.
(a) find equilibrium level of national income.
(b) find equilibrium level of consumption and saving.
(c) show equality of leakages and injections.
(d) calculate equilibrium level of national income when tax revenue are increased by 10.
(e) calculate equilibrium level of national income when government spending is reduced by
10.
(f) calculate the effect of equal change in tax revenue and government spending on
national income.
Answers
Explanation:
WE ASSUME THAT ECONOMY IS THE CLOSED ECONOMY.
Y = C + I +G
Y= 20+0.8Yd+50+ 20
Y=20+0.8(Y- 10)+70
Y=90+0.8Y-8
.2Y=82
a)Y=410.........(equilibrium level of national income)
b)Equilibrium level of consumption
b)Equilibrium level of consumption=20+.8(410-10)=340
b)Equilibrium level of consumption=20+.8(410-10)=340so saving=(400-340)=60
C)Government expenditure is greater than tax,So to mak this inequality into equality some aditional amaount should be injected to the economy. Injected amaunt=(20-10)= 10.
Answer:
ECONOMY, WE ASSUME, IS THE CLOSED ECONOMY.
When aggregate supply (AS) equals aggregate demand (AD), the formula for the equilibrium level of income is AS = AD. The formula becomes Y = C + I + G, where Y represents aggregate income, C represents consumption, I represents investment expenditure, and G represents government expenditure.
Y = C + I + G
Y= 20+0.8Yd+50+ 20
Y=20+0.8(Y- 10)+70
Y=90+0.8Y-8.2
Y=8
a)Y=410 (equilibrium level of national income)
b)Equilibrium level of consumption=20+.8(410-10)=340
Consumption equilibrium level=20+
8(410-10)=340
As a result, saving=(400-340)=60
C) Because government spending exceeds tax revenue, some more funds need be pumped into the economy to level the playing field. Amount injected=(20-10)=10.
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