Question: Assume Malaysia has a consumption function as = 100 + 0.2, where is disposable income. A tax rate of 0.20 for every RM1 income earned
Assume Malaysia has a consumption function as = 100 + 0.2, where is disposable income. A tax rate of 0.20 for every RM1 income earned by the household is imposed by the government. Firms' investment is fixed at RM50 mil, while government spending at RM20 mil. a) Provide the savings function b) By using algebra, compute the national income at equilibrium by using the aggregate expenditure method. c) Draw a Keynesian cross diagram to illustrate the equilibrium national income.
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