Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. (a) If the equilibrium national income is less than the full-employment level of income by N$100, what should be the increase in government spending or in exports to attain the full-employment level of income? (b) With a help of a diagram explain and discuss life cycle hypothesis.
Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. (a) If the equilibrium national income is less than the full-employment level of income by N$100, what should be the increase in government spending or in exports to attain the full-employment level of income? (b) With a help of a diagram explain and discuss life cycle hypothesis.
Chapter9: Aggregate Expenditures
Section: Chapter Questions
Problem 7E
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Suppose an economy is described by the following equations: Y = C + I + G + X – M
C = 14 + 0.60Yd
I = 20
G = 20
X = 15
M = 5 +0.1Y
T = 20 + 0.4Y
Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services.
(a) If the equilibrium
(b) With a help of a diagram explain and discuss life cycle hypothesis.
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