MGEA06H3 Lecture Notes - Government Budget Balance, Disposable And Discretionary Income, 1
16 Jun 2013
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MGEA06H3 Full Course Notes
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If r is held fixed at 0. 06 & e is held fixed at 0. 85 us$ per c$, then. I = 130 10(0. 06 0. 06) = 130. X = 330 4(0. 85 0. 85) = 330. Im = 0. 23y + 3. 5(0. 85 0. 85) = 0. 23y. Suppose the general wage rate is 20, i. e. , w = 20: disposable income, di: Di = y 0. 25y + [140 0. 05y] = 140 + 0. 7y: c = c(y): C = 14 + 0. 9(140 + 0. 7y) + (100 p) C = 240 + 0. 63y p: the ae function: Ae = c + i + g + x im. Ae = [240 + 0. 63y p] + 130 + 300 + 330 0. 23y. Ae = 1000 + 0. 4y p: the ad function. Y = 1666 1 p or: equilibrium output & price: In equilibrium, as = ad: ( 200 + 0. 2y)(20/20) = 1000 0. 6y. P* = 1000 0. 6(1500) = 100 or: government (budget) deficit: Gbb = 0. 25y [140 0. 05y] 300 = 0. 3y 440.
