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

ENGR.ECONOMIC ANALYSIS
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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

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