1. National income model in a closed economy (without export and import) is given by: Y = C +1, + GO C = a + b(Y – T) T

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1 National Income Model In A Closed Economy Without Export And Import Is Given By Y C 1 Go C A B Y T T 1 (96.78 KiB) Viewed 61 times

1. National income model in a closed economy (without export and import) is given by: Y = C +1, + GO C = a + b(Y – T) T = T. + eY where Y national income, C household consumption, 1. investment, Go Government Spending, T tax. Y, C and T are endogenous variables, while I., Go, To, a, b and e are parameters (similar to exogenous variable) In the time of pandemic, government try to boost the economy by increasing government spending (Go) and lower tax by decreasing To. What is the impact of increasing government spending to the national income (ay ſago); and the impact of lowering To to the national income (ay/ato). Use implicit function approach and Cramer's Rule in your answer. Define the Jacobian matrix of the problem and check whether the requirement for functional independence in Jacobian matrix is satisfied so the solution exists! b. Solve oy/aGo! what is the direction and the interpretation of your solution? Solve ay/OT,! what is the direction and the interpretation of your solution? a. c.