BC170403985

SEMESTER FALL 2018

PRINCIPLES OF MACROECONOMICS (ECO303)

ASSIGNMENT 1
DUE DATE: NOVEMBER 22, 2018

Suppose that saving and investment functions of Pakistan are as follows:

S= - 40+0.15Y I=0.07Y Where S=Saving, I=Investment, Y= National Income

National Income (Y) Saving (S) Investment (I)
(Billion R.s.)
10000 ? ?
15000 ? ?
20000 ? ?
25000 ? ?
30000 ? ?
35000 ? ?

SOLUTION:

National Income (Y) Saving (S) Investment (I)

(Billion R.s.)
10000 1460 700
15000 2210 1050
20000 2960 1400
25000 3710 1750
30000 4460 2100
35000 5210 2450

1)
National income = 10000 National income = 10000
Saving=? Investment=?
Investment=? I = 0.07Y
 S= -40 + 0.15Y I = 0.07(10000)
S= -40 + 0.15(10000) I = 700
S= -40+ 1500
S= 1460

2)
National income = 15000 National income = 15000
Saving=? Investment=?
Investment=? I = 0.07Y
S= -40 + 0.15Y I = 0.07(15000)
S= -40 + 0.15(15000) I = 1050
S= -40 + 2250
S= 2210

3)
National income = 20000 National income = 20000
Saving=? Investment=?
Investment=? I = 0.07Y
S= -40 + 0.15Y I = 0.07(20000)
S= -40 + 0.15(20000) I = 1400
S= -40 + 3000
S= 2960

4)
National income = 25000 National income = 25000
Saving=? Investment=?
Investment=? I = 0.07Y
S= -40 + 0.15Y I = 0.07(25000)
S= -40 + 0.15(25000) I = 1750
S= -40 + 3750
S= 3710

5)
National income = 30000 National income = 30000
Saving=? Investment=?
Investment=? I = 0.07Y
S= -40 + 0.15Y I = 0.07(30000)
S= -40 + 0.15(30000) I = 2100
S= -40 + 4500
S= 4460

6)
National income = 35000 National income = 35000
Saving=? Investment=?
Investment=? I = 0.07Y
S= -40 + 0.15Y I = 0.07(35000)
S= -40 + 0.15(35000) I = 2450
S= -40 + 5250
S= 5210