a)Suppose the consumption function is,C = 100 + 0.70Y, and autonomous investment is $200.

Estimate:

1.The equilibrium level of Income;

2.Consumption and Savings at the equilibrium level of Income.

b)Consider the following numerical version of the Keynesian model with a government.

C = 200 + 0.8Y_d, I = 150,G = 180,T = 300

1.Solve for the value of equilibrium output.(Y_d = Y - T)

2.Calculate the value ofthe budget deficit or surplus

3.Compute the value of the multiplier?

4.Explain how will a 100% increase in government spending affect equilibrium output.

c. The following table contains information from Jamaica's Balance of Payments for the years 2013 & 2014.

($US millions)

2013 2014

Goods/Merchandise exports1580.51482.2

Goods/Merchandise imports5462.05199.9

Services Account Balance623.5655.8

Current Transfers Balance2220.52293.9

Current Income Balance-276.9-342.9

Reserves Balance77.8-953.3

1.Calculate the Current Account Balance for 2013 & 2014. (Do working out)

2.Comment on the changes in the Current Account Balance of 2014 over 2013.