Question

given a model with the following structural quations
y = c + I + G + (X - M) where
C = 30 + 0.75Y
I = N80 million
G = 120 million
X = 20 million
M = 5 + 0.2 y
determine
i) equilibrium national income
ii) income multiplier
b analyze the import demand equation
use a numerical example to define and explain the concept of multipier

Answer 1

$$Y=30+0.75Y+80+120+20-5-0.2Y$$

$$0.45Y=245$$

i)

$$Y=544$$

ii)

$$\mu=0.45$$

b)

$$M=5+0.2Y$$

$$M=5+0.2\times544=113.8$$