ANSWER THE FOLLOWING

5. In the following table, you are given the following parameters for the economy of Atris: (9

Marks)

C = 100 + 0.85Y

I = 300

G = 150

X = 60

IM = 10 + 0.05Y

a) What is the value of expenditures equilibrium?

b) What is the value of total leakages and injections at expenditures equilibrium?

c) Suppose autonomous expenditure increases by $25. What is the new value of expenditure equilibrium?

6. The budget function for the economy of Sunsville is T - G = -400 + 0.25Y. (12 Marks)

a) Suppose income is $4,000. What is the value of the budget surplus or deficit?

b) What range of income will give Sunsville a budget surplus?

c) What range of income will give Sunsville a budget deficit?

d) At what level of income will there be a balanced budget?

7. Consider the following AE function:

AE = 600 + 0.75Y

a) What is the value of expenditure equilibrium? (2 Marks)

b) If income is equal to $3,000, what is the value of unplanned inventories? Will there be a

surplus or a shortage? (3 Marks)