QUESTION FOUR Consider an open economy with the following specifications: Derive the savings function and show...

QUESTION FOUR

Consider an open economy with the following specifications:

Derive the savings function and show that . [3 marks]
Define a budget deficit and state whether the government is in a deficit or surplus. [3 marks]
Given that the economy is open, state and explain the components of Aggregate demand (AD). [4 marks]
Derive the equilibrium income and clearly show the multiplier. [10 marks]
What will be the impact on the equilibrium income if investment spending increased by 30%? [5 marks]

Expert Solution

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Rahul Sunny answered 1 year ago

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