Question

# You are given the following information for the economy of Sonume (in million of cedis )

Consumption C= 250+0.7Yd

Net tax; T=40+0.2Y

Planned investment Ia=280

Government Purchases G =400

I. Write the economy's planned expenditure function from the above information.

ii. Find the aggregate output at which the goods market is an equilibrium (from the information given) algebraically

iii. Compare the effect or raising autonomous taxes by 80 and reducing government purchases by on equilibrium aggregate output in the goods market.

How do you explain the difference(if any)

iv. The Sonume government raises the marginal tax rate from 0.2Y to 1/3Y. Write the equation for the planned expenditure function which reflects the higher marginal rate, and draw a graph of this planned expenditure function. Find the new value of the multiplier (K) and the new equilibrium aggregate output the goods sector.

2.The following information is given for the expanded economy or the Sonume district

Consumption C=250+0.8YD

Net taxes : T=250

Planned investment 10-350

I. Write the for the equation for the economy's autonomous spending function

ii. Find the equilibrium aggregate output demanded in good market

Step-by-step explanation
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