at the left side T 150 sorry for the inconvenience Task 2 s

at the left side (T = 150) sorry for the inconvenience.

Task 2. sume that in the model of national economy household consumption is C 300+ 0.9*DI, companies\' gross ment is Ig 200, but government expenses are G 250, while the sum of taxes collected by the governme = 150, Taking into acco a) Equilibrium level of income Y; b) Calculate the value of Marginal propensity to consume and value of Marginal propensity to save; c) Private consumption at macroeconomic equilibrium; d) Develop equation of saving and calculate amount of saving at the point of equilibrium level of income unt that disposable income DI = Y-T, calculate:

Solution

(a) In equilibrium, Y = C + Ig + G

Y = 300 + 0.9(Y - 150) + 200 + 250

Y = 750 + 0.9Y - 135

(1 - 0.9)Y = 615

0.1Y = 615

Y = 6,150

(b)

Marginal propensity to consume (MPC) = 0.9 [Coefficient of DI in consumption function]

Marginal propensity to save (MPS) = 1 - MPC = 1 - 0.9 = 0.1

(c) When Y = 6,150:

C = 300 + 0.9 x (6,150 - 150) = 300 + 0.9 x 6,000 = 300 + 5,400 = 5,700

(d)

Saving (S) = Y - C

S = Y - [300 + 0.9 x (Y - 150)]

S = Y - (300 + 0.9Y - 135)

S = Y - (165 + 0.9Y)

S = Y - 165 - 0.9Y

S = 0.1Y - 165 [Equation of (private) saving]

When Y = 6,150:

S = (0.1 x 6,150) - 165 = 615 - 165 = 450