Hello, I want to ask for correction to my work in this problem. There is already the answer key provided by my teacher. The part that I am confused about will be in bold below, it is about why the tax function is not sum up in the leakages function, and my question will be at the end of the problem.

Given information:

C =10.000 + Yd

T =400 +1/10Y

F =1.200 -1/20Y

I = 20.000 -81.000 i

G =15.000

X =9.000

M =600 + 1/5Y

Question: Find the I-S function by the Fiscal Sector Equilibrium method! (Answer key: Y= 96.000 - 144.000 i)

Answer step by steps:

1. CONSUMPTION & SAVING FUNCTIONS AFTER BEING INFLUENCED BY TAX AND SUBSIDY

C =10.000 + (Y-400 -2/20 Y

+1.200 -1/20Y)

C =10.000 + (Y-3/20 Y +800)

C =10.000 + (17/80 Y + 800)

C =10.000 + 51/80 Y + 600

C =10.600 + 51/80 Y

So, the saving function is --> S =-10.600 + 29/80 Y

2.Fiscal Sector Equilibrium method

FISCAL SECTOR EQUILIBRIUM

INJECTIONS = LEAKAGES

I + G + X=S + T + M

INJECTIONS FUNCTION:

I + G + X= 20000 - 81000 i + 15000 + 9000

I + G + X= 44000 - 81000 i

LEAKAGES FUNCTION :

S + T + M= (S + T) + M

S + T + M= (-10600 + 29/80 Y) +(600 + 16/80 Y)

S + T + M= -10.000 + 45/80 Y

EQUILIBRIUM

I + G + X=S + T + M

44000 - 81000 i = -10.000 + 45/80 Y

9/16Y=54000 - 81000 i

Y= 16/9 (54000) - 16/9(81000) i

Y= 96.000 - 144.000 i

MY QUESTION

Why the tax function is not added here? What does (S + T) mean? Why only the savings function and import function are added in leakages function?

S + T + M= (S + T) + M

S + T + M= (-10600 + 29/80 Y) +(600 + 16/80 Y)

Why it is not like this:

S + T + M= (-10600 + 29/80 Y) +(400 +1/10Y) +(600 + 16/80 Y)