Question

Automous consumption =100m

Investment spending =100m

Government spending 200milion

Export =150 million

Automous export =100 million

Marginary propensity to consume =1/3

Taxes rate is 1/10

Marginary propensity to import 1/10

YF=2150 million

Questions 1.1 culculate the level of Automous spending in the country

1.2calculate the size of multiplier

1.2 calculate equilibrium level of the income

Answer 1

1.1

Autonnomous spending = C+I+G+E+X

$=100+100+200+150+100=R650\space million$

1.2

$multiplier=\frac{1}{1-MPC(1-t)+MPM}\\=\frac{1}{(1-\frac{1}{3})(1-\frac{1}{10})+\frac{1}{10}}=0.7$

`1.3

$y=C+I+G+E-M\\Y=100+\frac{1}{3}(Y-\frac{1}{10}Y)+100+200+150-(100+\frac{1}{10}Y)\\Y=550+\frac{3Y}{10}-\frac{Y}{10}\\5Y=550+Y\\Y=R135\space million$