Answer to Question #250890 in Math for oumama

Question

Let The National- Income Model Be: Y = C + I0 + G) C= A+B +B(Y- T0) (A ˃ 0, 0 ˂ B ˂ 1) G = Gy (0 ˂ G ˂ 1) (A) Identify The Endogenous Variables. (B) Give The Economic Meaning Of The Parameter G. (C) Find The Equilibrium National Income. (D) What Restriction On The

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5. Let the national- income model be:

Y = C + I0 + G)

C= a+b +b(Y- T0) (a ˃ 0, 0 ˂ b ˂ 1)

G = gy (0 ˂ g ˂ 1)

(a) Identify the endogenous variables.

(b) Give the economic meaning of the parameter g.

(c) Find the equilibrium national income.

(d) What restriction on the parameters is needed for a solution to exits?

Answer 1

(a) The endogenous variables are:

Y, C. Values for these variables are only determined by solving the model.

(b) The parameter g is for marginal propensity of government expenditure.

(c) The equilibrium national income is:

Y = a + b + b(Y - T0) + I0 + gY,

Y(1 - b - g) = a + b - bT0 + I0,

$Y =\frac{a + b - bT0 + I0}{1 - b - g}.$

(d) The restriction on the parameters ineeded for a solution to exits are:

$1 - b - g \neq 0$ or $b + g \neq 1$ .