Suppose we have an economy described by the following functions:
C=50+0.8Yd
I¯=70
G¯=200
TR¯=100
TA¯=50
a. Calculate the equilibrium level of income in this case?
b. What is the level of saving in equilibrium?
c. If, for some reason, output is at the level of 800, what will the level of involuntary inventory accumulation (IU) be?
d. What is the value of the multiplier here?
e. If TR¯ increases by 50, what will the effect be on the equilibrium income? What is the new equilibrium level of income?
f. Calculate the budget surplus (BS) in the economy?
g. Draw a diagram indicating the equilibria in both parts (a) and (e)?