Assume you are the Minister of Finance and Economic Planning for Ghana, in charge of Fiscal Policy. The Research Director of the Ministry brought you the following data on Ghana for the previous fiscal year, 2021. An examination of the data reveals that, during the fiscal year 2021, households in Ghana saved 20% of their disposable income (Y) and spent the rest on consumption. In addition, GH5,000.00 was spent on Consumption expenditure (C), which is independent of income and Gross Private Investment (I) was GH$7,000.00. Total Government expenditure (G) which stood at GHe8,000.00 was supposed to be financed by a lump sum tax of GH€2,000.00 (independent of income) and a proportional tax rate of 25% of national income. Exports (X) stood at GH€2,500.00. In addition, the country's import (M) during the previous fiscal year comprises of GHe 1,000.00 which was independent of the country's national income and 10% which was dependent of the country's national income. Given these data on Ghana for the previous year. i. Compute the equilibrium level of income (Y), Consumption (C), Tax (T) and Savings (S). (Hint: C = a + byd ; T = T₁+tY and M = M₁ + mY) Determine the Government fiscal stance. 11. 111. If the full employment level of national income is GHe 40,000.00, determine the income gap.
Assume you are the Minister of Finance and Economic Planning for Ghana, in charge of Fiscal Policy. The Research Director of the Ministry brought you the following data on Ghana for the previous fiscal year, 2021. An examination of the data reveals that, during the fiscal year 2021, households in Ghana saved 20% of their disposable income (Y) and spent the rest on consumption. In addition, GH5,000.00 was spent on Consumption expenditure (C), which is independent of income and Gross Private Investment (I) was GH$7,000.00. Total Government expenditure (G) which stood at GHe8,000.00 was supposed to be financed by a lump sum tax of GH€2,000.00 (independent of income) and a proportional tax rate of 25% of national income. Exports (X) stood at GH€2,500.00. In addition, the country's import (M) during the previous fiscal year comprises of GHe 1,000.00 which was independent of the country's national income and 10% which was dependent of the country's national income. Given these data on Ghana for the previous year. i. Compute the equilibrium level of income (Y), Consumption (C), Tax (T) and Savings (S). (Hint: C = a + byd ; T = T₁+tY and M = M₁ + mY) Determine the Government fiscal stance. 11. 111. If the full employment level of national income is GHe 40,000.00, determine the income gap.
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.4P
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Transcribed Image Text:Assume you are the Minister of Finance and Economic Planning for Ghana, in charge of Fiscal
Policy. The Research Director of the Ministry brought you the following data on Ghana for the
previous fiscal year, 2021. An examination of the data reveals that, during the fiscal year 2021,
households in Ghana saved 20% of their disposable income (Y) and spent the rest on consumption.
In addition, GH¢5,000.00 was spent on Consumption expenditure (C), which is independent of
income and Gross Private Investment (I) was GH¢7,000.00. Total Government expenditure (G)
which stood at GHc8,000.00 was supposed to be financed by a lump sum tax of GH¢2,000.00
(independent of income) and a proportional tax rate of 25% of national income. Exports (X) stood
at GH¢ 2,500.00. In addition, the country's import (M) during the previous fiscal year comprises of
GH$1,000.00 which was independent of the country's national income and 10% which was
dependent of the country's national income. Given these data on Ghana for the previous year:
i. Compute the equilibrium level of income (Y), Consumption (C), Tax (T) and Savings (S).
(Hint: C = a + byd ; T = To +tY and M = M₁ + mY)
Determine the Government fiscal stance.
11.
111.
If the full employment level of national income is GH¢40,000.00, determine the income gap.
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