Consider the following economy where autonomous consumption is 660, the marginal propensity to consume is 0.8, autonomous
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Question:
Consider the following economy where autonomous consumption is 660, the marginal propensity to consume is 0.8, autonomous taxation is 200, the income tax rate is 0.2, planned investment is 500, government spending is 500, autonomous net exports is 300 and nx is 0.04.
(a) Calculate the equilibrium value of income (Y).
(b) Calculate the value of the multiplier.
(c) Calculate the value of total consumption when the economy is in equilibrium.
(d) Illustrate (draw) the consumption function; identifying where savings and dis-savings (negative savings) occur. Make sure you clearly labelling every component (ie, autonomous consumption, equilibrium income with values).
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
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