Ekafarah P

13 Juni 2023 03:45

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Ekafarah P

13 Juni 2023 03:45

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Kevin L

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12 Juni 2024 11:08

a. To find the marginal propensity to consume (MPC), we need to look at the coefficient of Yd in the consumption function. In this case, the coefficient is 0.6, so MPC = 0.6. b. The saving function can be found by subtracting the consumption function from disposable income (Yd). Therefore, S = Yd - C = Yd - (100 + 0.6Yd) = 0.4Yd - 100. c. The marginal propensity to save (MPS) is the coefficient of Yd in the saving function. In this case, MPS = 0.4. d. To find the output at equilibrium, we need to set aggregate output (Y) equal to aggregate expenditure (C + I + G + X - M). Substituting the given values, we get Y = (100 + 0.6Yd) + 25 - 20%Y + 50 + (25) = 200 + 0.4Yd - 0.2Y. Solving for Y gives us Y = 500 + 2Yd. a. At equilibrium, Y = 500 + 2Yd. b. To find the net tax that the government can collect at equilibrium, we substitute the equilibrium output into the net tax function: T = 40 + 0.25(500 + 2Yd) = 40 + 125 + 0.5Yd. c. To determine if the government budget is in deficit or surplus, we compare government expenditure (G) with net tax revenue (T). If G > T, there is a deficit; if G < T, there is a surplus.


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