What is the equilibrium income

Reference no: EM133504519

Question: Assume that the consumption function of an economy is C=100+0.8Yd, the investment is I=50, the governing purchases of goods and services is G=300, the transfer payments TR=62.5 and the fixed tax is TA=250 (all are in billion dollars). Assume jo foreign trade.

a) What is the equilibrium income?

b) Find the investment multiplier, governing purchases multiplier, taxes multiplier, and transfer payments multiplier, and balanced budget multiplier, respectively.

c) Assume that the national income required for the society to achieve full employment is 1800. Find the solutions to the following three situations respectively to reach full employment.

(cl) How much should the government purchases be increased?
c2) How much should the taxes be reduced?

c) How much should the government purchases be increased?

Reference no: EM133504519

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