Answered: T = 20 + 0.2 × Y T R = 10 − 0.1 × Y…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A simple Macro model.

In a closed economy (no trade), the government does three things. It purchases goods and services (G), it collects tax revenue (T) and it makes transfers to household and businesses (TR).

G = 50

T = 20 + 0.2 × Y

T R = 10 − 0.1 × Y

where Y is national income.

The basic consumption function is given by

C = 30 + 0.8 × Y_D

where Y_D is disposable national income.

The desired investment is an autonomous term

I = 30

a) Write down the equation for the AE (aggregate expenditure) function for this economy.

b) Compute the equilibrium level of national income in this economy.

c) Compute the value of the simple multiplier.

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