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c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 0, and 0

c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 0, and 0

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 <c<1 Note: C is consumption, Y is income, and T is tax payment. Hence, Y – T is disposable income. a is constant and c is the marginal propensity to consume. where d > 0, and 0 <t <1 Note: T is the tax payment and t is the tax rate. d is constant and t is a parameter. iii. Tax function: T = d + tY,
Transcribed Image Text:c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 <c<1 Note: C is consumption, Y is income, and T is tax payment. Hence, Y – T is disposable income. a is constant and c is the marginal propensity to consume. where d > 0, and 0 <t <1 Note: T is the tax payment and t is the tax rate. d is constant and t is a parameter. iii. Tax function: T = d + tY,
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