3) Suppose that for a particular economy, investments (I) equal $100m, government expenditures (G) are $250m, exports (X) amount to 400m while imports (M) are $175m. The consumption function can be represented by the following equation:
C = 300M + 0.80Yd
a) Identify the following:
(i) Autonomous consumption 1 mark
(ii) The marginal propensity to consume 1 mark
(iii) The value of the multiplier 2 marks
b) Calculate the equilibrium level of GDP(Y) 5 marks
c) Draw a Keynesian cross showing the equilibrium level of GDP (calculated in question 3b) and aggregate expenditure. 5 marks
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3) Suppose that for a particular economy, investments (I) equal $100m, government expenditures (G) a...
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