During the 2012 fiscal year, households in an economy spent 80 per cent of their disposable income on consumption as well as GH¢300 consumption expenditure which is independent of income. Total government expenditure which stood at GH¢800 was supposed to be financed from a proportional tax levy of 50 per cent of national income and a VAT of GH¢100. Total private investment spending was made up of GH¢400 whereas export was GH¢400 and an autonomous import of GH¢500. Also, marginal propensity to import was 0.15. 1. Determine the equilibrium national income for this economy. 2. Determine the consumption and savings levels at equilibrium national income. 3. Find the size of the (expenditure) multiplier.
During the 2012 fiscal year, households in an economy spent 80 per cent of their disposable
income on consumption as well as GH¢300 consumption expenditure which is independent of
income. Total government expenditure which stood at GH¢800 was supposed to be financed
from a proportional tax levy of 50 per cent of
private investment spending was made up of GH¢400 whereas export was GH¢400 and an
autonomous import of GH¢500. Also, marginal propensity to import was 0.15.
1. Determine the equilibrium national income for this economy.
2. Determine the consumption and savings levels at equilibrium national income.
3. Find the size of the (expenditure) multiplier.
4. Determine the new equilibrium level of income if government expenditure increases by
GH¢70.
5. If full employment output is 2000, what
face?
6. In what direction should government expenditure change in order to achieve full
employment output?
7. Determine the fiscal stance for this economy.
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