Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 y= 1700 consumption = 1200 4) What is the level of private saving in equilibrium? 5) What is the level of public saving in equilibrium? 6) What is the level of aggregate saving in equilibrium?

Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 y= 1700 consumption = 1200 4) What is the level of private saving in equilibrium? 5) What is the level of public saving in equilibrium? 6) What is the level of aggregate saving in equilibrium?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQP

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Assume that the economy can be modeled as follows:

AE = C + I + G

C = 300 + .6Yd

I = 400

G = 100

T = 200

y= 1700

consumption = 1200

4) What is the level of private saving in equilibrium?

5) What is the level of public saving in equilibrium?

6) What is the level of aggregate saving in equilibrium?

7) Imagine the government would like to increase equilibrium GDP to 2,000, what would it have to set the level of government spending to?

8) What is the size of the spending multiplier?

9) What is the size of the tax multiplier?

Definition Definition Income earned by a government that is not spent on current expenses, but rather saved for future investments or to pay off debts. It is the difference between government revenue and expenditures, and can be positive or negative.

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