ECON102 Lecture 27: Recap Chapter 27.docx

You are given the following information regarding an open economy (Rs. Million). Consumption Function: C = 100+ 0.6 Yd Yd = Y – T Private Investment: I = 100 Government Expenditure G = 300 Direct Tax Function: T = 0.25Y Exports X = 80 Imports M = 25.       

a) Determine the equilibrium level of national income (Y) of the economy.   

For an economy, aggregate demand equals:

a. consumption plus investment plus (taxes minus transfers) plus (exports minus imports).
b. consumption plus investment plus government spending plus (exports minus imports).
c. consumption plus investment plus government spending plus exports.
d. consumption plus investment plus government spending plus net exports (imports minus exports).

The GDP deflator is a price index that includes the following components of GDP:

a) Consumption

b) Consumption plus investment but not exports

c) Consumption, investment plus exports minus imports

d) Consumption, investment, government plus exports minus imports.