(18) Assume the following economy: Autonomous Consumption = £10,000; Marginal Propensity to Consume = 0.8; Business
Posted: Mon Apr 25, 2022 8:21 am
(18) Assume the following economy:
Autonomous Consumption = £10,000; Marginal Propensity to Consume =
0.8; Business Investment = £30,000
A. Find the equilibrium size of income Y and the size of the
Multiplier of Business Investment (Hint: to find the Multiplier
increase investment by 10,000)
B. Assume now that a government sector is introduced, while
business investment is still I=£30,000. Government spending injects
G=£50,000 into the economy. However, in order to finance its
expenditure, the government levies an income tax at a rate of
25%.
Autonomous Consumption = £10,000; Marginal Propensity to Consume =
0.8; Business Investment = £30,000
A. Find the equilibrium size of income Y and the size of the
Multiplier of Business Investment (Hint: to find the Multiplier
increase investment by 10,000)
B. Assume now that a government sector is introduced, while
business investment is still I=£30,000. Government spending injects
G=£50,000 into the economy. However, in order to finance its
expenditure, the government levies an income tax at a rate of
25%.