Macroeconomics (Related Topics: National Income)
I. HappxNukland is a small closed-economy where households have a consumption function as $500+0.7Yd. Firms have an investment function as $700+0.2Y, while government expenditure equals to $650. However, the government collects lump-sum tax of $200, income tax of 5% and provides transfer payment of $50 to the economy.
Due to uncertainty during COVID-19 pandemic, households have lower expectations of their future income causing them to reduce their autonomous consumption from $500 to $350. Given the situation, what would happen to the equilibrium level of output? Also, find the value of autonomous consumption multiplier. (10 pts)
2. Thailand is set to run relatively wide budget deficits over the coming years, as the government seeks to support the economy amid the headwinds from the pandemic and a downtum in exteral demand.
If we assume that Thailand is a closed economy, please use both Loanable Funds Market and Market for Goods and Services models to explain the effects of a decrease in investment on the Thai economy (i. the real interest rate; ii. national saving; iii. investment; iv. consumption; and v. output.). (5 pts)
