Y7

Part 1. Suppose The marginal propensity to consume out of disposable income is 0.8 and the marginal propensity to import is 0.2. If the government imposes a net tax of 10 percent on income, t = 0.1. a) What is the slope of the AE function? b) What is the size of the multiplier? Part 2. Autonomous expenditure by the household and business sectors (C + I) is 410, government expenditure is 80, exports are 100 and imports are 50. c) What is the value of autonomous expenditure? d) What is the equilibrium output? e) What is the government's budget balance? Part 3. The government increases its expenditures by 38 to provide additional funding for national health care. i) The equilibrium income and output will By ? g) The net tax revenue By? h) What is the government's new budget balance