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a. The Goods Market (20 Marks) 1. Private saving is given by S = Y - T -C while public saving is given by T
a. The Goods Market (20 Marks) 1. Private saving is given by S = Y - T -C while public saving is given by T - G. In equilibrium, output is equal to demand; Y = Z. If the marginal propensity to save is 0.2, then show, algebraically, that the equilibrium level of output is given by Y = 5[co + 7 +G - 0.8T]. 2. Following on from 1. Calculate the impact on equilibrium output (Y) of a $10m cut in taxes. 3. In equilibrium output (Y) equals demand (Z). Given C = 100+ 0.75Y), I = 200, T = 400 and G = 300, where Z = C +I+G and Y] = Y T, solve for equilibrium output, disposable income, and equilibrium consumption
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