CHAPTER 3 - DETERMINATION OF NATIONAL INCOME EQUILIBRIUM

The circular flow of income in a two-sector economy consists of

• firms and government

• households and firms

• households and government

• firms and international trade

One of the factors influencing the government in making investments is

• rate of interest

• national income goals

• political and security considerations

• prediction of the total tax that will be collected

Which of the following equations describe a four-sector economy equilibrium?

• I + G + X = S + T + M

• I + G + S = X + T + M

• I + G + T = S + X + M

• I + G + M = S + T + X

Given the following information:

S = -100 + 0.2Yd

T = 0.1Y

Consumption function after tax is

• C = 100 + 0.8Y

• C = 100 + 0.2Y

• C = 100 + 0.72Y

• C = 100 + 0.18Y

S = -100 + 0.2Yd

T = 0.1Y

If the investment is RM20 million and government expenditure is RM 10 million, calculate the total consumption at the national income equilibrium level

• RM357.14 million

• RM434.28 million

• RM464.28 million

• RM650.00 million

The balance of national income in the three-sector economy will not change through

• taxes and savings

• consumption expenditure

• government expenditure

• net export

In a three sectors economy, the tax function is T = RM200 million, the investment function is I = RM300 million, the government expenditure function is G = RM250 million and the consumption function is C = 150 + 0.8Yd.

Calculate the aggregate expenditure when income (Y) =

• RM2,700 million

• RM2,850 million

• RM2,940 million

• RM3,100 million

Consumption (C) = 600 + 0.7Yd

Investment (I) = RM350 million

Government expenditure (G) = RM400 million

Tax (T) = RM250 million

Export (X) = RM300 million

Import (M) = RM200 million

The value of marginal propensity to save is

• 0.3

• 0.7

• 1.0

• 1.3

Consumption (C) = 600 + 0.7Yd

Investment (I) = RM350 million

Government expenditure (G) = RM400 million

Tax (T) = RM250 million

Export (X) = RM300 million

Import (M) = RM200 million

Compute National Income equilibrium

• RM1,909 million

• RM3,667 million

• RM4,250 million

• RM4,500 million

Disposable income can be written as

• C + I + G + T

• C = S + I

• C + S = I

• Y - T