Question 2 Suppose the economy of Oforikrom, an island is described by the following C = 100+ 0.75Yd I: = 75 G = 50 T = 0.2Y TR = 100 Where C-consumption, I= investment, G-government spending, T= taxes and TR= transfer payment. Use this information to answer the following questions a. Compute private saving, b. Calculate the public saving and national saving. c. Compute the government spending multiplier and the tax multiplier and explain what each means d. Find the equilibrium level of national income. e. Now suppose government spending doubles. Compute private saving, public saving, and national saving. f. Find the new equilibrium level of national income. g. Suppose the tax function is now T = 50+ 0.2Y find the equilibrium output h. From your answer above, determine the output gap if full employment out is GH1500 i. What amount of government spending will yield an equilibrium income of Gh1500 using the values of the components of aggregate demand given at the beginning of the question.

Question 2 Suppose the economy of Oforikrom, an island is described by the following C = 100+ 0.75Yd I: = 75 G = 50 T = 0.2Y TR = 100 Where C-consumption, I= investment, G-government spending, T= taxes and TR= transfer payment. Use this information to answer the following questions a. Compute private saving, b. Calculate the public saving and national saving. c. Compute the government spending multiplier and the tax multiplier and explain what each means d. Find the equilibrium level of national income. e. Now suppose government spending doubles. Compute private saving, public saving, and national saving. f. Find the new equilibrium level of national income. g. Suppose the tax function is now T = 50+ 0.2Y find the equilibrium output h. From your answer above, determine the output gap if full employment out is GH1500 i. What amount of government spending will yield an equilibrium income of Gh1500 using the values of the components of aggregate demand given at the beginning of the question.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

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