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Question One a) The Kenya National Bureau of statistics has made the following estimates for the...

Question One

a) The Kenya National Bureau of statistics has made the following estimates for the

Kenyan economy; -

Marginal propensity to consume (MPC) = 0.25, Investment (I) = 5500, Government

spending (G) = 12000, Autonomous consumption (α) = 1500,

Net Exports (X-M) = 3500

Y= C+ I + G + X-M

C= α + βY

Required; -

i) Calculate the equilibrium level of National Income.

ii) Calculate the equilibrium consumption and savings.

iii) Compute a simple investment multiplier and interpret it.

b) Explain why a little inflation is always necessary so as to grease the wheels of the economy.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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