This is “Review and Practice”, section 2.3 (from appendix 2) from the book Macroeconomics Principles (v. 1.1).
This book is licensed under a Creative Commons by-nc-sa 3.0 license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms.
This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.
Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page.
For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (36 MB) or just this chapter (2 MB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
Suppose an economy is characterized by the following equations. All figures are in billions of dollars.
C = 400 + ⅔(Yd)
T = 300 + ¼(Y)
G = 400
I = 200
Xn = 100
Consider the following economy. All figures are in billions of dollars.
C = 180 + 0.8(Yd)
T = 100 + 0.25Y
I = 300
G = 400
Xn = 200
Suppose an economy has a consumption function C = $100 + ⅔ Yd. Autonomous taxes, Ta, equal 0, the income tax rate is 10%, and Yd = 0.9Y. Government purchases, investment, and net exports each equal $100. Solve the following problems.