An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services. 1.1 (a)Determine the equilibrium level of income/ output. (b) Illustrate the aggregate spending curve and equilibrium level of income on a diagram. (c) Determine the surplus/ deficit in the government budget at equilibrium.(d) Determine trade balance at equilibrium. (e) Find the multiplier applicable to autonomous tax and interpret it.1.2 (a)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s:(i)GDP/ output (ii)Balance of trade (iii)Government budget
An open economy is described by the following system of
1.1 (a)Determine the equilibrium level of income/ output. (b) Illustrate the aggregate spending curve and equilibrium level of income on a diagram. (c) Determine the surplus/ deficit in the government budget at equilibrium.(d) Determine trade balance at equilibrium. (e) Find the multiplier applicable to autonomous tax and interpret it.1.2 (a)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s:(i)GDP/ output (ii)
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