Philip Leatherwood, Lecturer

Kazakhstan Institute of Management, Economics, and Strategic Planning

Student Number: _______________________

Name: _______________________________

Find the following values:

1. Equilibrium Income _________________
2. Equilibrium Consumption _________________
3. Savings _________________
4. The expenditures multiplier _________________
5. How can savings not equal investment? __________________________________

1. Add a third sector, Government, where—

Find the following values:

1. Equilibrium Income _________________
2. The expenditures multiplier _________________
3. The tax multiplier _________________
4. Government surplus/deficit _________________

1. Using your three sector model, assume full employment is reached only when Y = 6000.

1. What change in government spending would give Y = 6000? _________________
2. What change in tax would give Y = 6000? _________________
3. Why is the change in spending not the same as the change in income? ____________________________________________________________________________________________________________________________________

1. Using your three sector model, express tax as a 25% income tax.

Find:

1. equilibrium income _________________
2. the expenditures multiplier _________________
3. Why is the multiplier different than above?

5. Graph your three sector model including the spending change in 3.a.