the government of Happyland has budgeted an expenditure of 150 million Happydollars (their local currency). The information
Question:
- the government of Happyland has budgeted an expenditure of 150 million Happydollars (their local currency). The information below describes the macroeconomic situation of Happyland:
C = 100+ 0.8*Yd;
T = 20 - 0.125*Y;
I = 666 - 30*r;
(M/P)d= 4*Y-80*r,
MS/P = 6'000 with P=1.
where variables (Yd, Y, T, C, I) are expressed in million Happydollars and r is the interest rate expressed in percentage points (i.e. you don't need to change basis and should interpret r = 10 as a 10% interest rate). Note that Yd (disposable income) is not the same as Y (income).
Given the previous information for the goods and services market and the money market:
Find the output and the interest rate at equilibrium of the two markets (to be sure of your result, check that C + I + G = Y at equilibrium). How much is the level of investment in this economy? Who is the main provider of loanable funds in this economy, the public or the private sector?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill