00:01
So let's think about what's going on here.
00:03
We have a whole bunch of information.
00:05
We know that the marginal propensity to consume is 0 .8.
00:10
We know the tax rate is equal to 20%.
00:13
And we know that the marginal propensity to the import, which i'll call little m, is equal to 0 .14.
00:20
This tells us that aggregate expenditure looks something like this, right? accurate expenditure, which is c plus i plus g plus nx, must look like something like this.
00:32
So for consumption, it must be we have some autonomous consumption a plus 0 .8 times 1 minus 0 .2.
00:48
Why? this would be my consumption.
00:52
I consume some fixed amount of consumption, and then out of my disposable income, which is 80 % of my total income, because i pay 20 % of my income and taxes, i'm subtracting off 20 % in taxes, i spend 80 % of what's left on consumption.
01:12
Then we have some amount of investment, which is, i assume, not depending on income, g, not depending on income, export, we usually assume exports don't depend on income because exports depend on other people's income.
01:29
But then we also have here the marginal propensity to import, which i'll assume is minus 0 .41.
01:37
So this is saying that our imports are 14 % of our income, right? so here we know that in equilibrium, aggregate expenditure has equal y.
01:48
So what i want to do is bring the y to the other side of this equation, right? so i get in equilibrium, right, i get y.
02:02
I have now 0 .8 times minus 1, minus 0 .2, which is also 0 .8.
02:09
So i have minus 0 .64y plus 0 .14y is equal to a plus i plus i plus g plus x...