You are given the following income-expenditure model for the economy of Jitra C=200 +0.8% T= 50 G=100
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Question:
You are given the following income-expenditure model for the economy of Jitra
C=200 +0.8%
T= 50
G=100
I = 140
Where C, T, G, I, and Yd represent consumption, tax, government spending, investment, and disposable income, respectively.
- Derive the aggregate expenditure function and the saving function
- Calculate the equilibrium level of income and consumption in Jitra
- Based on your answer in b(iii), compute the new level of equilibrium income if the government spending increases to 150.
- Is this economy experiences a budget deficit, budget surplus or balanced budget? Explain your answer.
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