The data of the open economy of Northland is given below. All values are in Smillions....
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The data of the open economy of Northland is given below. All values are in Smillions. Use the information given below and your knowledge to answer the questions that follows. Consumption: C-10+ 0.8 YD Disposable income: YD-Y-NT Government's net tax: NT-0.2Y Planned investment: I-40 Government's expenditure: G-68 Export: X=22 Import: 0.14Y (a) What is the value of the marginal propensity to consume? (1 Mark) (5 Marks) (b) Calculate the value of the equilibrium level of income. (e) Calculate and explain the type of government budget at the equilibrium level of income in (b) above. (3 Marks) (d) Calculate the government's expenditure multiplier. (2 Marks) (e) Calculate the recessionary gap or an inflationary gap that is created when the full employment level of potential GDP is $400 million. (1 Mark) (1) Using AD/AS model illustrate the recessionary gap or an inflationary gap that you have calculated in (e) above. (3 Marks) The data of the open economy of Northland is given below. All values are in Smillions. Use the information given below and your knowledge to answer the questions that follows. Consumption: C-10+ 0.8 YD Disposable income: YD-Y-NT Government's net tax: NT-0.2Y Planned investment: I-40 Government's expenditure: G-68 Export: X=22 Import: 0.14Y (a) What is the value of the marginal propensity to consume? (1 Mark) (5 Marks) (b) Calculate the value of the equilibrium level of income. (e) Calculate and explain the type of government budget at the equilibrium level of income in (b) above. (3 Marks) (d) Calculate the government's expenditure multiplier. (2 Marks) (e) Calculate the recessionary gap or an inflationary gap that is created when the full employment level of potential GDP is $400 million. (1 Mark) (1) Using AD/AS model illustrate the recessionary gap or an inflationary gap that you have calculated in (e) above. (3 Marks)
Expert Answer:
Answer rating: 100% (QA)
a The marginal propensity to consume MPC is the change in consumption divided by the change in disposable income From the consumption function C 10 08... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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