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Calculate the total-spending function

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Reference no: EM131607244

Given the information in the table calculate the following:

Assume Y = N$500m + 0,85Y; M= 0,3Y; I = N$900m; G = N$850m; X = N$1,840m and t = 0,21Y.

1. Calculate the total-spending function and equilibrium income. Illustrate this on a graph.

2. Indicate on the graph the effect of an N$300 million increase in investment spending and comment on the magnitude of change in the equilibrium income relative to the change in investment spending. Calculate the new equilibrium income.

3. Assume the marginal tax changes to t = 0,35Y. How will this change influence the total spending curve? Illustrate this on your graph.

Reference no: EM131607244

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