Question 5 [20]

5.1. Consider the following economy and use the Keynesian model to answer the questions.

[Tip: Round off answers to two decimals. Final values are expressed in millions

of rands.]

C = 250 mil + 0.9Yd

I = 175 mil

G = 310 mil

X = 170 mil

Z = 120 mil

T = 0,25Y

Yf = R3 100 million

Equilibrium income: Y = C + I + G + (X - Z)

Disposable income: Yd = (1 - t)Y

5.1.1. Calculate the multiplier. (3)

5.1.2. Calculate the equilibrium level of income based on the calculated value of the

multiplier in 5.1. (3)

5.1.3. By approximately how much should investment spending be raised to achieve

full employment? (3)

5.1.4. How will the multiplier and the equilibrium level of income change by including

induced imports (m = 0.11)? (6)