An economy is represented by the following set of equations: Y =C+1
C= 80m + 1.6Y where
Y represents aggregate expenditure
C represents consumption expenditure by households.
I represents investment expenditure by firms M millions of Ghana cedis.
(a) Discuss broadly why the model is not an open economy?
(b) Discuss broadly investment expenditure (1) as used in the model.
(b) Using the consumption function, estimate the autonomous consumption; marginal propensity to consume (MPC) and the multiplier.
(c) Given that the value of Investment (I) is GH¢100m calculate equilibrium
(i) Estimate the aggregate expenditure (Y)
(ii) Consumption expenditure (C)
(iii) Aggregate saving (S)
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