Problem: The question asked that suppose that the consumption function in a particular economy is given by the following table:
Disposable Income Consumption Expenditure
(Billions of Dollars) (Billions of Dollars)
400 350
500 425
600 500
700 575
800 650
Assuming that no taxes are imposed (and that net exports are zero), what is the equilibrium value of GDP if government expenditures are $50 billion and inteneded investment is $50 billion?
The second question asked to use data from the first question to fill in the blanks. Suppose taxes are 20 percent of GDP.
GDP Consumption of Expenditure
(Billions of Dollars) (Billions of Dollars)
350
425
500
575
650
The third question asked to use data from the second question, is the government's budget balanced at the equilibrium level of GDP if government expenditures are $50 billion and intended investment is $50 billion? If not, how big is the surplus or defict?