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Question 3 The current state in the economy are as follows; Autonomous Consumption: 9000, Marginal Propensity to Consume: 0.4, Investment: 10000, Government Spending: 30000, Net
Question 3 The current state in the economy are as follows; Autonomous Consumption: 9000, Marginal Propensity to Consume: 0.4, Investment: 10000, Government Spending: 30000, Net Exports: 5000, Income Tax rate: 25%. The government wishes to conduct an injection into the economy to achieve a 45000 increase in national income. a) Calculated the current equilibrium income in the economy b) The government increases spending by 30000. Does this achieve the desired increase of 45000? c) How much should the government increase its spending to achieve the 45000 increase in national income (to the nearest whole number)? (Hint: consider the what the multiplier in this economy is) (10 marks)
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