02 Jun Question Question1 The following equations describe planned spending for a closed economy.
Question
Question1 The following equations describe planned spending for a closed economy.
(a) Write out the equation for the private saving function for this economy.(1 mark)
(b) What is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate equilibrium output for this economy. Show how you obtained your figure.(2 marks)
(c) Calculate the size of the budget surplus at equilibrium output.
(d) What is the size of the balanced budget multiplier for this economy?(1 mark)
Question 2
(a) Write out the equation for the private saving function for this economy.(1 mark)
(b) What is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate equilibrium output for this economy. Show how you obtained your figure.
(2 marks)
(c) Suppose the government introduces an expansionary fiscal policy by increasing government purchases by 40. Calculate the new equilibrium output.(1 mark)
(d) Explain how the actual effect of the expansionary fiscal policy in (c) may be a level of output less than what was calculated?
Question 3
(a) Write out the equation for the private saving function for this economy.(1 mark)
(b) What is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate equilibrium output for this economy. Show how you obtained your figure.
(2 marks)
(c) Show in a diagram and explain the effect of an increase in the marginal tax rate to 0.3. Calculate the new equilibrium output.(2 marks)
(d) Explain how the actual effect of the increase in the marginal tax rate in (c) may be a level of output less than what was calculated?
Question 4
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