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Consumption and savings at the equilibrium level of income

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Reference no: EM132512080

a) Suppose the consumption function is, C = 100 + 0.70Y, and autonomous investment is $200.

Estimate:

1. The equilibrium level of Income;

2. Consumption and Savings at the equilibrium level of Income.

b) Consider the following numerical version of the Keynesian model with a government.

C = 200 + 0.8Yd, I = 150, G = 180, T = 300

1. Solve for the value of equilibrium output. (Yd = Y - T)

2.Calculate the value of the budget deficit or surplus

3.Compute the value of the multiplier?

4.Explain how will a 100% increase in government spending affect equilibrium output.

c. The following table contains information from Jamaica's Balance of Payments for the years 2013 & 2014.

($US millions)

2013 2014

Goods/Merchandise exports 1580.5 1482.2

Goods/Merchandise imports 5462.0 5199.9

Services Account Balance 623.5 655.8

Current Transfers Balance 2220.5 2293.9

Current Income Balance -276.9 -342.9

Reserves Balance 77.8 -953.3

1. Calculate the Current Account Balance for 2013 & 2014. (Do working out)

2. Comment on the changes in the Current Account Balance of 2014 over 2013.

Reference no: EM132512080

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