GIVEN:Ca = 5,000 mps = 0.1I = 6,000 G = 4,000

Ta = 1,000 mpt =0.2TR = 1,500

REQUIRED:Show the solutions.

1.Formulate the consumption function.

2.Formulate the savings function.

3.Derive the equilibrium income for an economy consisting of HHs only and prove that Y = C & S = 0 using any approach of your choice.

4.Derive the equilibrium income for an economy consisting of HHs & BFs and prove that Y = C + I&S = I using any approach of your choice.

5.Derive the equilibrium income for an economy consisting of HH, BF & G does not impose taxes and prove that Y = C + I + G&S = I + G using any approach of your choice.

6.Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed taxes and prove that Y = C + I + G&S + T = I + G using any approach of your choice.

7.Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes and prove that Y = C + I + G&S + T = I + G using any approach of your choice.

8.Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes but grants transfer payments and prove that Y = C + I + G&S + T = I + G + TR using any approach of your choice.