Question

1 The following information is provided about an open economy with

a government. Use the information to answer the questions that follow (round off your answers to 2 decimal places):

Autonomous Consumption = 465

Marginal propensity to consume = 0.6

Autonomous Investment =295

Government expenditure = 450

Exports = 225

Imports = 130 + 0.1Y

T = 0.2Y

Yf = 2 237.9

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Q.1.1

Calculate the level of autonomous spending in this economy.

Q.1.2

Calculate the size of the multiplier.

Q.1.3

Calculate the equilibrium level of income.

Q.1.4

Calculate the tax revenue to the government of this country when the economy remains in equilibrium.

Q.1.5

Calculate what the equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%.

Q.1.6

Calculate the change in government spending required to reach full employment in the economy.

Please show all the calculations thank you