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Dannydan15
Jun 2, 2012, 01:03 AM
With reference to the simple closed economy income-expenditure model,
suppose the aggregate consumption function is C = 100 +0.8(Y – T); taxes are
T = 10 + 0.25Y; investment, I, is 300 and government expenditures, G, are 200.
(a) Calculate equilibrium income, consumption and the government budget
surplus. [20 marks]
(b) Calculate the level of income that equates taxes to government
expenditures. [10 marks]
(c) Calculate the government expenditure multiplier.
[10 marks]

Curlyben
Jun 2, 2012, 01:06 AM
What do YOU think.
While we are happy to HELP with your homework, we will NOT do it all for you.
Show us where you are having issues and we'll go from there.

Dannydan15
Jun 2, 2012, 03:34 AM
C = 100 +0.8(Y – T); taxes are
T = 10 + 0.25Y; investment, I, is 300 and government expenditures, G, are 200.

I know that Y(equilibrium income) = 1/1-MPC (0.8) X (C0 +I +G -C1T)
So Y= 1/1-(0.8) X 100+300+200 - (0.8 x (10+ 0.25Y)

But I have no clue how to find Y :(.

Please help.

Thanks