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Q2. (3) In a State of Sunshine, during the 2020 scal year, households spent 75% of their disposable income on consumption in addition to $50111

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Q2. (3) In a State of Sunshine, during the 2020 scal year, households spent 75% of their disposable income on consumption in addition to $50111 consumption expenditure independent of income. Total private investment stood at $60m, total government expenditure stood at $20m and exports and imports were $40m and $30m respectively. Find the equilibrium level of: i- Income ii. Consumption iii. Savings Doc. No; EXMIFIO3 Pa - e No; 111 Issma No; 1 Last Update: 15l05l15 Date: 12104106 Author. EC . - raved: PROVOST (b) Consolidated Bank is the only bank in the economy. The people in this economy have $80 million in money, and they deposit all their money in Consolidated Bank. i. Consolidated Bank decides on a policy of holding 100% reserves. Draw a T-account for the bank. ii. Consolidated Bank is required to hold 8% of its existing $80 million as reserves, and to loan out the rest. Draw a Taccount for the bank aer this rst round of loans has been made. iii. Assume that Consolidated bank is part of a multika system. How much will money supply increase with the 8% reserve? (30 marks)

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