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Macroeconomic BED1201 The following information relates to a hypothetical country called Dark Islands. C=5,000 + 0.8...

Macroeconomic BED1201

The following information relates to a hypothetical country called Dark Islands.
C=5,000 + 0.8 Yd
I=200
G=1000
T=300 (where T is tax)


Required:
i. Compute Y, C and S
ii. Compute the multiplier

Solutions

Expert Solution

Explanation : As given in the question is consumption function that is C= 5000+0.8Yd

Here, autonomous consumption is 5000

Marginal propensity to consume is 0.8

Yd is disposable income .

So, we can drive saving functions from consumption function that is S = -s + MPS ( Yd)

S = -5000+1- MPC (Yd )

S = -5000+0.2 (Yd)

Solution to both parts is given in following images:

Rahul Sunny answered 2 years ago
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