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Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.?
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Suppose you have been given the following inform about the closed econ...
Equilibrium Level of National Income
The equilibrium level of national income can be found by setting Y = C + I + G in the equation C = 20 + 0.8(Y-T) + 4 and solving for Y.
Y = C + I + G
Y = 20 + 0.8(Y-T) + 4 + I + (-50) + (-20)
Y = 54 + 0.8Y - 0.8T + I
Simplifying the equation, we get:
0.2Y = 54 - 0.8T + I
Y = (54 - 0.8T + I) / 0.2
Therefore, the equilibrium level of national income is (54 - 0.8T + I) / 0.2.
Equilibrium Level of Consumption and Savings
To find the equilibrium level of consumption and savings, we can use the equation C = 20 + 0.8(Y-T) + 4.
Substituting Y with (54 - 0.8T + I) / 0.2, we get:
C = 20 + 0.8((54 - 0.8T + I) / 0.2 - T) + 4
C = 20 + 32 - 4T + 0.8I
Simplifying the equation, we get:
C = 52 - 4T + 0.8I
To find the equilibrium level of savings, we can use the equation S = Y - C.
Substituting Y with (54 - 0.8T + I) / 0.2 and C with 52 - 4T + 0.8I, we get:
S = (54 - 0.8T + I) / 0.2 - (52 - 4T + 0.8I)
S = 2 + 3.2T - 4I
Therefore, the equilibrium level of consumption is 52 - 4T + 0.8I and the equilibrium level of savings is 2 + 3.2T - 4I.
Equality of Savings and Consumption
At the equilibrium level of income, savings are not necessarily equal to consumption. This is because the economy can be in a situation where there is either a surplus or a deficit depending on the level of investment.
Equilibrium Level of National Income with Increased Government Spending
To calculate the equilibrium level of national income when government spending is increased by 10, we can use the formula Y = (54 - 0.8T + I) / 0.2 and substitute G with -60.
Y = (54 - 0.8T + I - 60) / 0.2
Y = (54 - 0.8T + I - 300) / 0.2
Y = (-246 - 0.8T + I) / 0.2
Therefore, the equilibrium level of national income is (-246 - 0.8T + I) / 0.2.
Government Spending Multiplier
The government spending multiplier is the ratio of the change in equilibrium output to the change in government spending.
In this case, the government spending multiplier can be calculated as:
Multiplier = ΔY / ΔG
Multiplier = [(54
The equilibrium level of national income can be found by setting Y = C + I + G in the equation C = 20 + 0.8(Y-T) + 4 and solving for Y.
Y = C + I + G
Y = 20 + 0.8(Y-T) + 4 + I + (-50) + (-20)
Y = 54 + 0.8Y - 0.8T + I
Simplifying the equation, we get:
0.2Y = 54 - 0.8T + I
Y = (54 - 0.8T + I) / 0.2
Therefore, the equilibrium level of national income is (54 - 0.8T + I) / 0.2.
Equilibrium Level of Consumption and Savings
To find the equilibrium level of consumption and savings, we can use the equation C = 20 + 0.8(Y-T) + 4.
Substituting Y with (54 - 0.8T + I) / 0.2, we get:
C = 20 + 0.8((54 - 0.8T + I) / 0.2 - T) + 4
C = 20 + 32 - 4T + 0.8I
Simplifying the equation, we get:
C = 52 - 4T + 0.8I
To find the equilibrium level of savings, we can use the equation S = Y - C.
Substituting Y with (54 - 0.8T + I) / 0.2 and C with 52 - 4T + 0.8I, we get:
S = (54 - 0.8T + I) / 0.2 - (52 - 4T + 0.8I)
S = 2 + 3.2T - 4I
Therefore, the equilibrium level of consumption is 52 - 4T + 0.8I and the equilibrium level of savings is 2 + 3.2T - 4I.
Equality of Savings and Consumption
At the equilibrium level of income, savings are not necessarily equal to consumption. This is because the economy can be in a situation where there is either a surplus or a deficit depending on the level of investment.
Equilibrium Level of National Income with Increased Government Spending
To calculate the equilibrium level of national income when government spending is increased by 10, we can use the formula Y = (54 - 0.8T + I) / 0.2 and substitute G with -60.
Y = (54 - 0.8T + I - 60) / 0.2
Y = (54 - 0.8T + I - 300) / 0.2
Y = (-246 - 0.8T + I) / 0.2
Therefore, the equilibrium level of national income is (-246 - 0.8T + I) / 0.2.
Government Spending Multiplier
The government spending multiplier is the ratio of the change in equilibrium output to the change in government spending.
In this case, the government spending multiplier can be calculated as:
Multiplier = ΔY / ΔG
Multiplier = [(54
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Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.?
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Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.?.
Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose you have been given the following inform about the closed economy C - 20 4 0.8 Y 1 - 50 G - 20 T - 1 Yd - Disposable Income = Y -T (i) Find the equilibrium level of nation ii) Find an equilibrium level of consumption (C) and savings (S). ini) Are savings equal to consumption at the equilibrium level of income? (iv) Calculate the equilibrium level of tional income when government spending is increased by 10 (v) Calculate the value of the government spending multiplier.?.
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