SUGGESTED SOLUTIONS

CHAPTER
National Income
12 Equilibrium

Section A
  1 A 2 D 3 B 4 D 5 B
  6 D 7 B 8 C 9 D 10 A
11 D 12 A 13 B 14 C 15 A
16 B 17 C 18 C 19 D 20 D

Section B
1 (a)
National income (Y) Savings (S) Consumption (C) Investment (I)
(RM million) (RM million) (RM million) (RM million)
    0 –150 100 275
  250 –62.5 312.5 275
  500 25 475 275
  750 112.5 637.5 275
1,000 200 800 275
1,250 287.5 962.5 275
1,500 375 1,125 275
1,750 462.5 1,287.5 275
2,000 550 1,450 275
(b) C 5 150 1 0.65Y
(c) Y 5 C 1 I
5 150 1 0.65Y 1 275
0.35Y 5 425
Y 5 RM1,214.30 million
(d) ΔY 5 1 y MPS 3 ΔG
5 1 y 0.35 3 175
5 RM500 million
So, the new equilibrium is Y 5 Y 1 ΔY
5 1,214.50 1 500
5 RM1,714.30 million
 Suggested Solutions
2

2 (a) MPS 5 1 – MPC

5 1 – 0.7
5 0.3
(b) S 5 –700 1 0.3Yd
(c) Y 5 C 1 I 1 G 1 (X – M)
5 700 1 0.7(Y – 350) 1 450 1 500 1 (400 – 300)
5 1,750 1 0.7Y – 245
0.3Y 5 1,505
Y 5 RM5,016.70 million
(d) Inflationary gap
AD
Y = AD
C + I + G + (X – M)

C + I + G + (X – M) fe

45°
NIL
4,000 5,016.7

3 (a) X 5 500, Y 5 100 and Z 5 400

(b) APC 5 1
(c) APC 5 C/Y 5 1,600/2,000 5 0.8
(d) Y 5 C 1 I
5 150 1 0.75Y 1 400
0.25Y 5 550
Y 5 2,200
(e) S 5 –150 1 0.25Y

4 (a)
National Disposable Government Aggregate
Taxes Consumption Savings Investment
income income expenditure expenditure
100 100 0 50 250 25 100 175
200 100 100 125 225 25 100 250
300 100 200 200 0 25 100 325
400 100 300 275 25 25 100 400
500 100 400 350 50 25 100 475
600 100 500 425 75 25 100 550
700 100 600 500 100 25 100 625
800 100 700 575 125 25 100 700

(b) C 5 50 1 0.75Yd
S 5 –50 1 0.25Yd
(c) Y 5 RM400 million
 National Income Equilibrium
3

(d)
AD

AD = AS

C+I+G

C = 50 + 0.75Yd

400 National income (RM million)

5 (a) Country X
Y 5 150 1 0.75(Y – 60) 1 50 1 75
5 275 1 0.75Y – 45
0.25Y 5 230
Y 5 RM920 billion
Country Y
Y 5 150 1 0.75(Y – 0.2Y) 1 200 1 150
5 500 1 0.75(0.8Y)
5 500 1 0.6Y
Y 5 RM1,250 billion
(b) Leakages–injection approach
leakage/injection
S+T

350 I+G

NI
1,250
(c) Country X
ΔY 5 1 y MPS 3 ΔG
5 1 y 0.25 3 6
5 RM24 billion
Country Y
ΔY 5 1 y MPS 3 ΔG
5 1 y 0.4 3 6
5 RM15 billion
(d) Country X
Kt 5 –MPC y MPS
5 –0.75 y 0.25
5 –3
Country Y
Kt 5 –MPC y MPS
5 –0.6 y 0.4
5 –1.5