Question:
C= 50+0.8Yd
I=70
G=200
TR=100
t= 0.2Y
Where C is consumption expenditure, Yd is disposable income, I is investment expenditure, G is government expenditure, TR is transfer payments, t is the tax rate and Y is income
a) Calculate the following:
(i) Level of income)
(ii) Level of consumption
(iii) Amount of taxes collected
(iv) The government budget deficit or surplus
(v) Amount of private savings
(vi) Amount of public savings)
(vii) Amount of national savings
(viii) The government expenditure multiplier
(ix) Calculate the change in income if government spending increases by 10.
(x) The transfer payment multiplier
(xi) The change in income if transfer payments are reduced by 10
b) Why is there a difference between the government expenditure multiplier and transfer payment multiplier?