1 a) The following data relate to the economy of XYZ Shilling "million" Investment 4,000 Government Spending 10,000 Autonomous consumption 8,000 Net exports 3,600 The marginal propensity to save of the economy of country XYZ is 0.4 Required: ) Write the coasumption function of the economy. i) Compute the equilibrium level of income in the economy. QUESTION TWO a) Suppose the aggregate demand and supply schedules for a hypothetical economy are as shown below. Amount of real Amount of real domestic Price level domestic output output demanded, billions $ 200 (price index) supplied, billions 300 $800 400 250 S00 600 200 600 800 150 400 1,000 100 200 O Use these sets of data to graph the aggregate demand and supply curves on the belov graph. (i1) What will be the equilibrium price and output level in this hypothetical economy? I it also the full-employment level of output? Explain. (ii) Why won't the 150 index be the equilibrium price level? Why won't the 250 index be the equilibrium price level? (iv) Suppose demand increases by $400 billion at each price level. What will be the ne equilibrium price and output levels?

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HPS2125.220.ASIGNMENT-Unsaved
1
a) The following data relate to the economy of XYZ
Shilling "million"
Investment
4,000
Government Spending
10,000
Autonomous consumption
8,000
Net exports
3,600
The marginal propensity to save of the economy of country XYZ is 0.4
Required:
i) Write the consumption function of the economy.
i) Compute the equilibrium level of income in the economy.
QUESTION TWO
a) Suppose the aggregate demand and supply schedules for a hypothetical economy are as
shown below:
Amount of real
Amount of real domestic
Price level
domestic output
supplied, billions
output demanded, billions
$ 200
(price index)
300
$800
400
250
800
600
200
600
S00
150
400
1,000
100
200
@ Use these sets of data to graph the aggregate demand and supply curves on the below
graph.
(i) What will be the equilibrium price and output level in this hypothetical economy? Is
it also the full-enmployment level of outpur? Explain.
(i) Why won't the 150 index be the equilibrium price level? Why won't the 250 index
be the equilibrium price level?
(iv) Suppose demand increases by $400 billion at each price level. What will be the new
equilibrium price and output levels?
B IU e A
Transcribed Image Text:A AI PO© .. 3.71K/s O il.l 93% 5:13 AM HPS2125.220.ASIGNMENT-Unsaved 1 a) The following data relate to the economy of XYZ Shilling "million" Investment 4,000 Government Spending 10,000 Autonomous consumption 8,000 Net exports 3,600 The marginal propensity to save of the economy of country XYZ is 0.4 Required: i) Write the consumption function of the economy. i) Compute the equilibrium level of income in the economy. QUESTION TWO a) Suppose the aggregate demand and supply schedules for a hypothetical economy are as shown below: Amount of real Amount of real domestic Price level domestic output supplied, billions output demanded, billions $ 200 (price index) 300 $800 400 250 800 600 200 600 S00 150 400 1,000 100 200 @ Use these sets of data to graph the aggregate demand and supply curves on the below graph. (i) What will be the equilibrium price and output level in this hypothetical economy? Is it also the full-enmployment level of outpur? Explain. (i) Why won't the 150 index be the equilibrium price level? Why won't the 250 index be the equilibrium price level? (iv) Suppose demand increases by $400 billion at each price level. What will be the new equilibrium price and output levels? B IU e A
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