n Utopia (a country with substantial excess resources), consumers spend 70% of their incomes and save 30%; the country spends 30% of GDP on imports and the government typically takes 10% of household incomes in taxation. a) What is the value of the multiplier? Last year, the Utopian Government spent 5Bn Utopian Dollars on current expenditure; Utopian households spent 0.5Bn Utopian Dollars in “autonomous consumption” and Utopian enterprises sold goods and services worth 10 Bn Utopian dollars to other countries. Utopian investors spent 15Bn Utopian dollars in maintaining and enhancing the country’s capital equipment. b) What was the value of GDP last year? c) What was the value of the Utopian Government’s budget surplus or deficit last year? d) How would the value of the multiplier (in 2(a) change if Utopia was a closed economy (so zero imports)?
In Utopia (a country with substantial excess resources), consumers spend 70% of their incomes and save 30%; the country spends 30% of GDP on imports and the government typically takes 10% of household incomes in
a) What is the value of the multiplier?
Last year, the Utopian Government spent 5Bn Utopian Dollars on current expenditure; Utopian households spent 0.5Bn Utopian Dollars in “autonomous consumption” and Utopian enterprises sold goods and services worth 10 Bn Utopian dollars to other countries. Utopian investors spent 15Bn Utopian dollars in maintaining and enhancing the country’s capital equipment.
b) What was the value of GDP last year?
c) What was the value of the Utopian Government’s budget surplus or deficit last year?
d) How would the value of the multiplier (in 2(a) change if Utopia was a closed economy (so zero imports)?
e) If the Utopian economy were already at its potential GDP (ie its full -employment GDP), what would happen to the value of the multiplier?
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