Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following information is for X-Land a simple economy with two sectors only household and firms. C= 400 + 0.8Y, I = 500 where C

The following information is for X-Land a simple economy with two sectors only household and firms.

C= 400 + 0.8Y, I = 500 whereCis consumption,Yis equal to national income, andIis investment.

(a)Calculate the equilibrium level of national income for X-Land.[5mk]

What is the value of the multiplier in X-Land.[2mk]

(b) A government sector is introduced in X-Land as the country starts to become developed.

There is now government spending and taxation in X-LandG = 980,WhereGis

government spending on goods and services.

Calculate the new equilibrium level of national income for X-Land.[5mk]

If taxation = .25Y what the value of tax.

Is the government running a surplus or a deficit? Support with your working.[3mk]

(c) X-Land has transit to a full economic model to include a foreign sector with:

M =0.4Y and X = 1800whereMis imports andXis exports.

Calculate the new equilibrium level of national income for X-Land.[3mk]

(d) Show the final equilibrium level of income on the 450diagram.[5mk]

(e) If full employment national income is 7000 what kind of gap is the economy of X-land is operating with? Explain your answer. [5mk]

(f)The multiplier in X-Land is now only 1.25 compared to its lager value in part of 5 in part(a).How would you explain this.[7mk]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Exploring Economics

Authors: Robert L Sexton

5th Edition

978-1439040249, 1439040249

More Books

Students also viewed these Economics questions

Question

Mechanism of p-nitroaniline and hydrochloric acid

Answered: 1 week ago

Question

=+ b. What is the per-worker production function, y = f(k)?

Answered: 1 week ago