Reference no: EM132506990

Part A The fol lowing equations describe economy Y. All figures except the parameters are in millions of dollars.

C = Co + cYD (Private Consumption by Households)

YD = Y + TR - T (Private disposable income)

T = To + tY (Total taxes)

G = Go (Government Expenditure)

TR = TRo (Transfer Payments)

I = Io + zY (Private investment)

X = Xo (Total Exports)

IM = IMo + mY (Total imports)

SP = YD - C

SG = T - (G + TR)

SF = IM - X

Y = C + I + G + X - M (Equilibrium condition)**

Endogenous Variables: C, YD, T, IM, I and Y

Exogenous Variables: Co = 450, To = 80, Io = 400, Go = 250, TRo = 250, Xo = 200, IMo = 110

Parameters: c = 0.68, t = 0.16, z = 0.12, m = 0.30

Use the information from page 1 and 2 to calculate the values for;

i) Y

ii) YD

iii) IM

iv) SG

Question 2

Part B

Economy Z's equilibrium income is described by the following variables;

C = 60 + 0.8YD, I = 70, G = 200, TR = 100, T = 0.10

Calculate the budget surplus.