00:01
So here we've got a three -sector economy, consumption, investment, government spending.
00:05
We're told that consumption has a base autonomous consumption of 300, and then any increase in income is spent on consumption to the factor of 0 .5.
00:16
So of any additional disposable income that the consumer has access to, they spent half of it on consumption, right? so this is disposable income, or income after taxes.
00:30
Investment is a fixed amount.
00:32
Of 250 and government spending is a fixed amount of 150.
00:38
So we're told that the tax rate is equal to 20%, right? what does that mean? it means that taxes are 0 .2 of y.
00:49
So every time you make income, you pay 20 % of it in taxes.
00:53
This means that your disposable income is equal to 0 .8y, which means that consumption is equal to 300 plus 0 .5 outside of 0 .8y, which is equal to 0 .4, uh, equal to, sorry, 300 plus 0 .4.
01:17
Why? great.
01:19
So now in equilibrium in a or in one, um, equilibrium, equilibrium is output equals aggregate expenditure, which is consumption plus investment plus government spending...