Consider the following equations for a small open economyC = 2500 + 0.85Yd; T = 700 + 0.25Y; G = 8000; TR = 800; I = 4000 + 0.2Y; M = 3000 + 0.25Y; X = 2000Use the reduced form equation to compute equilibrium national income.Compute the values of disposable income, consumption expenditure, tax revenue, and net exports.Using a measure, you are familiar with, demonstrate if the economy is operating a balanced budget.

The equilibrium occurs where a aggregate demand and aggregate supply are equal. The income level is…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following equations for a small open economy

C = 2500 + 0.85Y^d; T = 700 + 0.25Y; G = 8000; TR = 800; I = 4000 + 0.2Y; M = 3000 + 0.25Y; X = 2000

Use the reduced form equation to compute equilibrium national income.
Compute the values of disposable income, consumption expenditure, tax revenue, and net exports.
Using a measure, you are familiar with, demonstrate if the economy is operating a balanced budget.

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