Suppose an economy is characterized by the following equations:
C= 720 + 0.6Yd I = 500
G =500
T = 400
- Is this economy closed or open? Explain
- Write the expression and solve for the following:
- The equilibrium level of expenditure (YDemand)
- The total disposable income (Yd)of the household
- Total consumption expenditure
- Private savings, government savings and the national savings of the economy V. Is private saving the same as aggregate investment? Why or Why not?
- Assuming total output is equal to 5000, what is the total demand of this economy? Is it equal to total production? If not explain how interest rates and the firm would adjust to bring the economy to an equilibrium.