The economy of Sunrise Island has the following features: - fixed price level - no foreign trade

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The economy of Sunrise Island has the following features:

- fixed price level

- no foreign trade

- autonomous desired investment \((I)\) of \(\$ 20 \) billion

- autonomous government purchases \((G)\) of \(\$ 30 \) billion

- autonomous desired consumption (C) of \$15 billion

- marginal propensity to consume out of disposable income of 0 .75

- net tax rate of 0 .20 of national income

a. Write an equation expressing consumption as a function of disposable income.

b. Write an equation expressing net tax revenues as a function of national income.

c. Write an equation expressing disposable income as a function of national income.

d. Write an equation expressing consumption as a function of national income.

e. Write an equation for the \(A E\) function.

f. What is the marginal propensity to spend out of national income?

g. Calculate the simple multiplier for Sunrise Island.

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Macroeconomics

ISBN: 9780133910445

15th Edition

Authors: Christopher T S Ragan

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