Given the features of Sunrise island, estimate the equation for consumption, net tax revenues, disposable income, and calculate the simple multiplier.
The economy of Sunrise Island has the following features:
fixed price level
no foreign trade
autonomous desired investment (/) of $20 billion
autonomous government purchases (G) of $30 billion
autonomous desired consumption (C] of S15 billion
marginal propensity to consume out of disposable income of 0-75
net tax rate of 0.20 of national income
a. Write an equation expressing consumption as a function of disposable income.
b. Write down an equation expressing net tax incomes as a function of national income.