Question
The structural model of an economy is given as follows: C = 100+ 0.75Yd I = 200 G = T = 100 TR = 50
The structural model of an economy is given as follows:
C = 100+ 0.75Yd
I = 200
G = T = 100
TR = 50
Where G is government expenditure on goods and services, T is the lumpsum tax and TR are transfer payments
1.Find the equilibrium level of income
2 Calculate government expenditure multiplier and transfer payments multiplier. What is the difference between the two?
3 If full-employment level of income is 16,000crores, how much government expenditure be increased to attain full employment?
b) Examine the impact of an increase in price level on aggregate demand as the sum of four categories of spending, that is, C + I + G + NX.
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