An economy shows the following features: Consumption: C=80+0.8Yd (where Yd is disposable income) Tax: Investment: Transfer:...

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An economy shows the following features: Consumption: C=80+0.8Yd (where Yd is disposable income) Tax: Investment: Transfer: T=60+0.2Y (where Y is national income) I-200-10r (where r is interest percentage) TR=-40 Government expenditure: G=160 Transaction and precautionary demand for money: Speculative demand for money: Supply of money (in Ksh.) Required: (i) Calculate the equilibrium values of Y and r M=0.4Y M2-300-20r M=476 (10marks) (ii) Is the government in surplus or deficits An economy shows the following features: Consumption: C=80+0.8Yd (where Yd is disposable income) Tax: Investment: Transfer: T=60+0.2Y (where Y is national income) I-200-10r (where r is interest percentage) TR=-40 Government expenditure: G=160 Transaction and precautionary demand for money: Speculative demand for money: Supply of money (in Ksh.) Required: (i) Calculate the equilibrium values of Y and r M=0.4Y M2-300-20r M=476 (10marks) (ii) Is the government in surplus or deficits

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To find the equilibrium values of Y national income and r interest rate we need to equate the aggregate demand AD and aggregate supply AS in the econo... View the full answer