Hey there! Sign in to join this conversationNew here? Join for free
    • Thread Starter
    Offline

    3
    ReputationRep:
    An economy is currently in equilibrium. The following figures, in billions, refer to elements in its national income accounts:

    Consumption (total): £25
    Investment: £5
    Government expenditure: £5
    Imports: £5
    Exports: £10

    A)Current equilibirum level of national income?
    b)Level of injections
    c)level of withdrawls
    D)Assume the level of saving is £5 billion. What is the level of tax revenue?
    e) If national income now rises to £60billion and, as a result, the consumption of domestically produced goods rises to £30 billion, what is the marginal propensity to save?
    F)f) What is the value of the multiplier?
    Offline

    13
    ReputationRep:
    a) so Y(national income)= C + I + G +(N-X)

    =25 + 5 +5 + (10-5)
    =40 billion pounds

    b)injections= investment, gov spending, exports= 20 billion pounds

    c)withdrawals= imports, tax, savings ( you only show imports so I'm assuming) 5 billion pounds

    NB net injection is injections-withdrawals= 15 billion pounds

    d) unsure, i don't think i understand this one

    e) so income rises by 20 billion, and consumption by 5 billion, so mpc (consume) = 5/20=0.25

    thus mps (save) = 1-0.25= 0.75

    f) multiplier = 1/1-c (c being mpc)
    = 1/0.75
    = 1.333 (4/3)


    hope this helps, give some rep if you think it did!
 
 
 
Poll
Do you agree with the PM's proposal to cut tuition fees for some courses?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Write a reply...
Reply
Hide
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.