a) Consider an economy with no government sector and no international trade. Assume savings S are...

 

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a) Consider an economy with no government sector and no international trade. Assume savings S are described by the following equation: S = -200+0.3Y Where Y denotes national income. What is the marginal propensity to save in this case and what does it tell us? [5 marks] b) Find an expression for consumption as a function of income. What is the marginal propensity to consume in our case and what does it tell us? [5 marks] c) Suppose investments I are equal to 400. What is the equilibrium level of output in this economy? [10 marks] d) Derive an expression for the multiplier in this economy. What is its value and what does it tell us? [15 marks] e) Now assume that this economy engages in international trade (but that it still does not have a government sector). In particular..suppose that exports are fixed at 100 while imports are equal to 20% of national income. Derive an expression for the multiplier in this case and compute its value. Explain the reason behind the difference with respect to the multiplier you computed in the previous point. a) Consider an economy with no government sector and no international trade. Assume savings S are described by the following equation: S = -200+0.3Y Where Y denotes national income. What is the marginal propensity to save in this case and what does it tell us? [5 marks] b) Find an expression for consumption as a function of income. What is the marginal propensity to consume in our case and what does it tell us? [5 marks] c) Suppose investments I are equal to 400. What is the equilibrium level of output in this economy? [10 marks] d) Derive an expression for the multiplier in this economy. What is its value and what does it tell us? [15 marks] e) Now assume that this economy engages in international trade (but that it still does not have a government sector). In particular..suppose that exports are fixed at 100 while imports are equal to 20% of national income. Derive an expression for the multiplier in this case and compute its value. Explain the reason behind the difference with respect to the multiplier you computed in the previous point.

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Economic Analysis with Savings and Investment a Marginal Propensity to Save MPS From the savings equation S 200 03Ythe marginal propensity to save MPS ... View the full answer