IS VERY IMPORTANT FOR ME. I WILL MARK IT AS HELPFUL ! SO MANY PEOPLE IGNORE MY QUESTION AND I HAVE POST IT THIS MORNING. a) Consider an economy...
Question

# PLEASE ANSWER THIS QUESTION AS ACCURATE AS YOU CAN. IS VERY IMPORTANT

FOR ME. I WILL MARK IT AS HELPFUL !! SO MANY PEOPLE IGNORE MY QUESTION AND I HAVE POST IT THIS MORNING.

a) Consider an economy described by the following equations (all amounts given in billions of pounds):
C = 100 + c1YD; I = 150; G = 250; X = 350;
The marginal propensity to consume (c1) is given as [(10+a+8a)/100] where 'a' is 7 (then c1 will be equal to (10+7+8*7)/100 = 0.73)
Taxes are 20% of income Imports are 5% of income

-(i) Calculate, and illustrate graphically, the level of equilibrium income for this economy using the multiplier model.
-(ii) Calculate the value of the multiplier. How might the size of an economy's multiplier change depending on where it is in the business cycle?
-(iii) The impact of Covid-19 on the UK economy has prompted government to implement a number of economic stimulus packages to the value of £400 billion. Calculate the effect that this will have on equilibrium income in this economy (holding all other things constant). Show the initial change in government spending and the process of adjustment that takes place to the new level of equilibrium income by adding to the diagram you drew in part (a).b) Explain how the following characteristics of the US economy (during the Great Depression) could have impacted on the size of the multiplier at that time:

-(i) The size of government (i.e. an increase in the value of government expenditure as a percentage of GDP)
-(ii) The non-existence of unemployment benefits
-(iii) The share of imports (MPI) was very small

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