Question

Consider an economy described by the following​ equations: Y​ = C​ + I​ + G, G​ = 2,000 T​ = 2,000 C ​ = 250​ + 0.75YD I​ = 750 ​a) Is there a government budget​ deficit, budget​ surplus, or balanced​ budget? A. budget deficit B. budget surplus C. balanced budget ​b) Calculate the equilibrium value of Y. Y​ = ​$ nothing ​c) What is the value of autonomous consumption​ (c0)? autonomous consumption​ = ​$ nothing ​d) What is the value of​ MPC? What is the value of​ MPS? MPC​ = nothing MPS​ = nothing ​e) Calculate the value of APC and the value of APS. Round your answers at 2 decimal places. APC​ = nothing APS​ = nothing ​f) Calculate private​ saving, public saving and national saving. Private Saving​ = ​$ nothing Public Saving​ = ​$ nothing National Saving​ = ​$ nothing

Answer 1

Answer: See explanation

Step-by-step explanation:

a. This is a balanced budget. A balanced budget is when the government expenditure and the revenue generated are thesame. In this case, government expenditure (G) and revenue gotten from taxes (T) are both 2000.

b. The equilibrium value of Y will be:

Y = C + I + G

Y = 250 + 0.75(Y - 2000) + 750 + 2000

Y = 250 + 0.75Y - 1500 + 750 + 2000

Y - 0.75Y = 1500

0.25Y = 1500

Y = 1500/0.25

Y = 6,000

c. The value of the autonomous consumption​ (c0) will be:

c0 = 250

d. MPC = 0.75 ,

Note that MPS = 1 - MPC

= 1 - 0.75

= 0.25

e APC = C/YD

= 3250/4000

= 0.8125

APS = S/YD

= 750/4000

= 0.1875

f. Private Saving = 750

Public saving = 0

Then, the National Saving will be:

= Public savings - private savings

= 750 - 0

= 750