Question
You are provided with the following information about an imaginary economy called Keynesia: Government expenditure 400 Exports 250 Autonomous imports 50 Autonomous consumption 150 Investment
You are provided with the following information about an imaginary economy called Keynesia: Government expenditure 400 Exports 250 Autonomous imports 50 Autonomous consumption 150 Investment expenditure 300 Full- employment output 1900 Marginal propensity to consume 0.75 Marginal propensity to import 0.15 Tax rate 0.25 Required (I) Derive the IS equation (ii) Derive the savings function (iii) Calculate the equilibrium level of income using the aggregate expenditure approach. (iv) What would the value of income be if the trade balance is zero? (v) What would the value of income be if autonomous consumption increases by 50
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started