Assume a hypothetical closed economy. The National income identity expression for this economy is given as follows; Y= C + I + G, where C = α + β (Y – T), I is autonomous investment spending and G represents Government purchases. Suppose that marginal propensity to consume is 0.70 . If the Government decreases spending by kshs 500 billion and at the same time decreases taxes by kshs 400 billion, calculate the change in real income.

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A: We know, from the fundamental macroeconomic identity,  Y = C(Y - T) + I + G Where Y represents the…

Q: Suppose that autonomous consumption (a) is 200, private investment spending (I) is 340, government…

A: Given -  a = 200, I = 340, G = 300, T = 300, b = 0.8, t = 0.25

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A: Given  C=400+0.8(Y-T) I=310 G=140 T=200 So MPC=0.8

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A: Hi, thank you for the question. As per our Honor code, we are allowed to attempt only first three…

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A:

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Q: Suppose that autonomous consumption (a) is 200, private investment spending (I) is 340, government…

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A: Government purchases of goods and services increased by = $75000 MPC = 0.75

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A:

Q: True or false? Why? "The marginal propensity to consume out of transitory income is greater than the…

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Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…

A: All the parts of the question are solved below.

Q: ) increase by $160.

A: Answer Disposable income increased by $ 200 C = 400+ 0.8Yd de = 0.8 dYd Now, dyd = 200 So, de = 160

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