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Suppose a closed economy has an intended investment of 150 and an aggregate consumption function given by C = 200 +0
Suppose a closed economy has an intended investment of 150 and an aggregate consumption function given by C = 200 +0.75Yd. Suppose also that the government spends 150 but collects no taxes. What is equilibrium output and income? (round your answer to the nearest whole value) Your Answer: Answer Question 22 (1 point) Suppose a closed economy has antaggregate consumption function given by C = 300 +0.50 Yd and generates $2900 output and income in equilibrium. Suppose also that the government collects a lump-sum tax of 100. How much will the private sector be saving total in equilibrium? (round your answer to the nearest whole value) Your Answer:
Expert Solution
Answer 21)
At Equilibrium AS=AD
AS=Y
AD=C+I+G
C=200+0.75Yd
I=G=150
Yd=Y-T
Since tax T=0
Yd=Y
Y=200+0.75Y+150+150
0.25Y= 500
Y=2000
Equilibrium output and income=2000
Answer 22)
At Equilibrium AS=AD
AS=Y
AD=C+I+G
C=300+0.5Yd
I=G=0
Y=2900
Yd=Y-T
T=100
So, C=300+0.5(Y-100)
Private Savings=Y-T-C
Private Savings=2900-100-[300+0.5(2900-100)]
Private Savings= 2900-100-300- 1400
Private Savings= 1100
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