Answer to Question #191624 in Other for Elizabeth Mulingen

Question

Anopeneconomyisdescribedbythefollowingsystemofmacroeconomicequations,inwhich

allmacroeconomicaggregatearemeasuredinbillionsofNamibiandollars,N$:

Y=C +I+G+X-M

C =100+0.75Yd

T=50+0.5Y

X=200

M=50+0.25Y

G=150

Where: Yisdomesticincome

Yisprivatedisposableincome

Cisaggregateconsumption

Tisgovernmenttaxrevenue

Iisinvestmentspending

Xrepresentsexports

Mrepresentsimportsofgoodsandservice

(a)Determinetheequilibriumlevelofincome/output. (4)

(b)Illustrateaggregatespendingandequilibriumlevelofincomeonadiagram

(4)

(c)Determinethesurplus/deficitinthegovernmentbudgetatequilibrium.

(4)

(d)Determinetradebalanceatequilibrium. (4)

(e)Determinethevalueoftheeconomy’smultiplier,whichisapplicabletogovernment

spending,andinterpretit.

(5)

(f)Usethemultiplierapplicabletoexport,toexplainhowa100–billiondeclineindemand

forexportcouldaffecttheeconomy’s:

(i) GDP/income (3)

(ii) Balanceofpayment (4)

(iii) Governmentbudget (4)

Answer 1

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