This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Quiz #2 Answers 1. A - The total value of production of pizzas is: 150* 50 * $10 = $75K. Of this amount, government buys $10* 2500 = $25K. Therefore what is left for consumption is $75K-$25K = $50K. C = $50K. As for I, it is 50* 1* $500 = $25K. National income is equal to AE. AE here is C+I+G = $100K. 2. C - HH income before taxes = National income since firms do not keep any profits. Therefore HH income before taxes = $100K. T = $100K * 0.2 = $20K so HH disposable income = $80K. DI - C = $80K - $50K = $30K. 3. C - T = $100K *.2 = $20K and G = $25K. T-G = $ -5K and the government runs a budget deficit. 4. D - Aggregate S = I and since I = $25K, so is S = $25K. We can also calculate this figure by: HH savings + Gov savings + Firms savings = $30K - $5K + $0= $25K....
View Full Document
This test prep was uploaded on 04/07/2008 for the course ECON 201 taught by Professor Salehie during the Winter '08 term at University of Washington.
- Winter '08