Legoland, a closed economy, has a GDP of $900, consumption of $540, where government spends $225 and collects taxes of $180. Calculate [2 marks each]

a.Investment

b.Public Savings

c.Private Savings

d.National Savings

Now suppose the new government passes a tax cut of Rs. 90. How does your answer to parts a-d above change in each of the scenarios given below?

1.People keep all of the tax cut under their mattress [2 marks]

2.People spend all of the tax cut on Marvel universe paraphernalia [2 marks]

3.People use half the money to buy junk food and cars, and they keep the rest under their pillows [4 marks]

e.What happens to the economy when people spend some of the tax cut? Explain this phenomenon carefully, outlining the implications for the economy. [4 marks]

f.What is the effect of the tax cut on society in each case 1-3? Calculate your answer. [5 marks]