1.Derive and compare the multipliers for two-sector, three sector and four-sector economies.Assume a proportional income tax exists for the three-sector and four-sector economies.

2.Suppose that for a particular economy:

C = 2500 + 0.8Yd

T = 2500

G = 2500

I = 3000

(a)Determine the equilibrium income and show it graphically.Determine the government budget.

(b)Has the economy achieved full employment if equilibrium income at full employment is 35000?What are the required changes to achieve full employment, if

(i)government expenditure is increased? How does the government budget change?

(ii)taxes are reduced?What is the new budget and the new function for tax.

Show the outcomes graphically.

3.In a three-sector economy:

C = 200 + 0.75Yd

T = 0.2Y

I = 800

G = 1000

(a)Calculate national income when the economy is at equilibrium.Graph your results.

(b)Full employment is achieved when income is 5500.

(i)What is the multiplier?

(ii)How much should taxes be cut to achieve full employment?What is the budget at full employment?

1.In an open economy:

C = 400 + 0.75Yd

T = 0.2Y

I = 600

G = 1000

X = 500

Z = 0.1Y

(a)Calculate national income when the economy is at equilibrium. Use the injection-leakage approach to graph your results.

(b)Full employment is achieved when income is 5500. How much should government expenditure increase to achieve full employment?

(c)At full employment, what is the (i) budget? (ii) trade balance?

(d)Based on your answers in (c), is it advisable for government expenditure to increase to achieve full employment?Suggest a better option/ alternative.