Consider the closed economy with government which is described by the following functions: C = 200 + 0.75Yd, Yd = Y - T, I = 150, G = 250, T = 0.1Y. Where, C = consumption, Yd = disposable income, I = planned investment, G = government purchases of goods and services, and T = government taxes.
a) What is the equation for aggregate expenditure (AE) for this economy?
b) Calculate the equilibrium level of income and the multiplier.
c) Calculate the size of the budget surplus (or deficit) for the economy.
d) What is the level of savings in equilibrium?