Eco1302 Assign 3
Eco1302 Assign 3
ASSIGNMENT III
DATE: JUNE 2024 TIME: 1 HOURS
ASSIGNMENT III
a) You are provided with the following information about an imaginary economy called Keynesian:
Government expenditure 400
Exports 250
Autonomous imports 50
Required;
b) Assume a closed economy where the level of I is 300, G=T=150 and the savings function is S = −30 +
0.15
Where S is savings, I is investment, G is government expenditure, T is taxes and Yd is disposable income.
i) Calculate the equilibrium level of income.
ii) What will be the increase in national income if investment reduces by 25 holding other variables
constant?
iii) Suppose government reduced taxes by 100 in this economy, what would be the change in national
income?
d) If you woke up in the working & found that nominal GDP has doubled overnight, what statistic would
you need to check before you began to celebrate: Why?