c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where...

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c. National-Income model: Closed economy<br>i. Aggregate expenditure: AE = C +1 + G<br>Note: Exogenous investment and government expenditure: / = lo, G = Go<br>ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 <c<1<br>Note: C is consumption, Y is income, and T is tax payment. Hence, Y – T is disposable<br>income. a is constant and c is the marginal propensity to consume.<br>where d > 0, and 0 <t <1<br>Note: T is the tax payment and t is the tax rate. d is constant and t is a parameter.<br>iii. Tax function: T = d + tY,<br>

Extracted text: c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where a > 0, and 0 <><1 note:="" c="" is="" consumption,="" y="" is="" income,="" and="" t="" is="" tax="" payment.="" hence,="" y="" –="" t="" is="" disposable="" income.="" a="" is="" constant="" and="" c="" is="" the="" marginal="" propensity="" to="" consume.="" where="" d=""> 0, and 0 <1 note:="" t="" is="" the="" tax="" payment="" and="" t="" is="" the="" tax="" rate.="" d="" is="" constant="" and="" t="" is="" a="" parameter.="" iii.="" tax="" function:="" t="d" +="">

Jun 08, 2022

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c. National-Income model: Closed economy i. Aggregate expenditure: AE = C +1 + G Note: Exogenous investment and government expenditure: / = lo, G = Go ii. Consumption function: C = a + c(Y – T), where...

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