In Raphael Kingdom, it is known that at a point in time the people depended on benevolence to meet their consumption. This amounted to $200, however every $ 1; 80% goes to consumption. Additionally, the rich people of Raphael Kingdom carried the economy on their shoulders. This led to them putting $ 800 of their wealth in economy which led to the creation of a lot of jobs for the citizens. The government of the Kingdom supports production efforts by an amount of $ 400 as well as creating the enabling environment for all persons in the kingdom. Goods produced in the kingdom were consumed locally none of was exported or imported. The tax structure of kingdom consists of a lump sum tax of $ 100 and a proportional income tax rate of 2%. Given that you have been recruited as an expert to examine the economy of the Kingdom what will your advice or response to the following questions be?
Derive the consumption and saving functions for the kingdom explain the components of the function?
Determine the expenditure function for the kingdom; and explain your answer?
Work for the equilibrium income for the kingdom and determine the value of the multiplier?
What can you say about injections and leakages for this economy?
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