Use the expenditure details of a small economy to answer the questions. All the autonomous expenditures are given in $ million. Consumption expenditure ( C ) = $100 + 0.9 ( Y - T ) Investment(l) = $20 Government expenditure(G) =$80, Tax(T) =0.05Y Export(X) = $40 Import(M) =0.1 Y a. Determine the aggregate expenditure(AE) equation. Provide the working to your answer. b. Determine the equilibrium level of income? Provide the working to your answer. c. Explain the government's budget and trade balance and determine the size of the government's budget and trade balance.
Use the expenditure details of a small economy to answer the questions. All the autonomous expenditures are given in $ million.
Consumption expenditure ( C ) = $100 + 0.9 ( Y - T )
Investment(l) = $20
Government expenditure(G) =$80,
Tax(T) =0.05Y
Export(X) = $40
Import(M) =0.1 Y
a. Determine the aggregate expenditure(AE) equation. Provide the working to your answer.
b. Determine the equilibrium level of income? Provide the working to your answer.
c. Explain the government's budget and trade balance and determine the size of the government's budget and trade balance.
d. Suppose the government increase its expenditure by $ 10 million. Determine the new equilibrium income? Provide the working to your answer.
e. How much the government must increase its spending to achieve an equilibrium income of $1,000 million? Provide the working to your answer.
f. Suppose the full-employment income is $1,200 million. Describe the current economics situation based on the result in part(b). What does the government need to do to have the equilibrium income equal to the full-employment income? Provide the working to your answer.
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