Question

C= 450 +0.4Y
I=350
G=150
X=70
Z= 35+0.1Y
T= 0.15Y
Yf= 1550

Calculate the tax revenue to the government of this country when this economy remains in equilibrium

Answer 1

 Aggregate expenditure function, $AE=C+I +G +X-IM(importst)$

$C= 450 +0.4Yd$

Where Yd = Y- T

$AE= 450 +0.4(Y-T)+ 350 +150 +70- 0$

$Y=920 +0.4Y-0.06$

$Y-0.4Y=920-0.06$

$0.6Y= 919.94$

$0.6Y=919.94$

$Y=919.94\div0.6 = 1533.23$