An economy is currently in equilibrium. The following figures refer to elements in its national income accounts.\n\n\n\n\n\n \n\n\n£ billions\n\n\n\n\nConsumption (
An economy is currently in equilibrium. The following figures refer to elements in its national income accounts.
\r\n| \r\n \r\n | \r\n\r\n £ billions \r\n | \r\n
| \r\n Consumption (total) \r\n | \r\n\r\n 60 \r\n | \r\n
| \r\n Investment \r\n | \r\n\r\n 5 \r\n | \r\n
| \r\n Government expenditure \r\n | \r\n\r\n 8 \r\n | \r\n
| \r\n Imports \r\n | \r\n\r\n 10 \r\n | \r\n
| \r\n Exports \r\n | \r\n\r\n 7 \r\n | \r\n
\r\n
(a) What is the current equilibrium level of national income?
\r\n(b) What is the level of injections?
\r\n(c) What is the level of withdrawals?
\r\n(d) Assuming that tax revenues are £7 billion, how much is the level of saving?
\r\n(e) If national income now rose to £80 billion and, as a result, the consumption of domestically produced goods rose to £58 billion, what is the mpcd?
\r\n(f) What is the value of the multiplier?
\r\n(g) Given an initial level of national income of £80 billion, now assume that spending on exports rises by £4 billion, spending on investment rises by £1 billion, whilst government expenditure falls by £2 billion. By how much will national income change?
\r\n(h) Given this new level of national income, assume that full employment is achieved at a national income of £100. Is there an inflationary or a deflationary gap?
\r\n(i) What is the size of this gap?
