An economy has the following characteristics. All values are in $millions. [14 marks] C =
An economy has the following characteristics. All values are in $millions.[14 marks]
C = 120 + 0.9YD
YD = Y + TR - T
T = 100 + 0.1Y
I = 500
G = 600
TR = 200
X = 700
IM = 300 + 0.2Y
Where C is consumption, YD is disposable income, T is taxes, TR is transfer payments, I is investment, G is government expenditure, X is exports and IM is imports.
What is the value of the marginal propensity to save?
What is the value of the autonomous expenditure multiplier?
Calculate the value of the equilibrium level of real GDP?
Suppose that the full employment level of GDP is $5000m. State the type of output gap persistent in this economy and calculate its size.