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QUESTION 3 (30 MARKS) Consider a small closed economy that is described by the following information: =00; =1; =50; =40; =20 ; =.9 a) Calculate
QUESTION 3 (30 MARKS)
Consider a small closed economy that is described by the following information: =00; =1; =50; =40; =20 ; =.9
a) Calculate equilibrium national income. [10 marks]
b) Derive the specific saving equation that corresponds to the consumption equation. [5 marks]
c) At what level of income does savings equal zero? [5 marks)
d) If government spending increases by 150 which is funded by equal increase in tax, by how much will equilibrium income change?
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