Compute the equilibrium level of national income
Course:- Business Economics
Reference No.:- EM1349785

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Business Economics

Consider the following model of a closed economy:

C = 80 + 0.8Yd
I = 60
G = 100
T = 0.2 Y
where C is consumption, Yd is disposable income , I is investment, and G is government expenditures on goods and services, T is tax net of transfers and Y is national income.

a. Solve for aggregate expenditures (AE) as a function of Y, and calculate the equilibrium level of national income. Elucidate your equilibrium in a diagram with AE on the vertical axis and Y on the horizontal axis. What is the value of the multiplier? Is the government running a surplus or deficit?


Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
In the final round of a TV game show, contestants have a chance to increase their current winnings of $1 million to $2 million. If they are wrong, their prize is decreased to
The current crisis in Greece has led to an increase in its risk premium. Using the IS-LM model for a small open economy, show the impact of this increase in risk premium on ou
Beth is a college student who lives in San Francisco and provides math tutoring for extra cash. At a wage of $30 per hour, she is willing to tutor 6 hours per week. At $50 per
Consider the following model of demand for insurance (identical to that studied in class). Risk-averse individuals maximize expected utility of wealth where wealth is random d
Over the past seven weeks, we have explored the foundational concepts and principles of microeconomics, and we have applied them to the world around us. Choose one microeconom
Charles is a senior engineer who has worked for 18 years since he graduated from college. Yesterday in the mail, he received a report from the U.S. Social Security Administrat
Describe atleast 4 ways in which a firm can limit a worker's shirking. Ground your answer in an explicit theoretical framework(that you clearly state) that explains worker
What are the government's fiscal policy options for ending a severe recession? What are the short term and long term consequences of using fiscal policy for ending a server re