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Calculate the equilibrium value of income

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Reference no: EM132135743

Autonomous consumption = 660

Marginal propensity to consume = 0.8

Autonomous taxation = 200

Income tax rate = 0.2

Planned investment = 500

Government spending = 500

Autonomous net exports = 300

NX = 0.04

  1. Calculate the equilibrium value of income.
  2. Calculate the value of the multiplier.
  3. Calculate the value of total consumption when the economy is in equilibrium.
  4. Illustrate (draw) the consumption function; identifying where savings and dissavings (negative savings) occur. Make sure you clearly labelling every component (ie, autonomous consumption, equilibrium income with values).
  5. State the corresponding savings function (showing the value of autonomous savings and the marginal propensity to save).
  6. Show that leakages are equal to injections (remember to show each stage of your calculation).
  7. Suppose that government spending falls by 150. Calculate by how much the economy will contract as a result; using the multiplier equation.

Reference no: EM132135743

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