Description

a. The system of simultaneous equations below relates to the Nigerian economy during the year 2018. Equation (1) expresses aggregate income-expenditure of the Nigerian economy during the year 2018, and that each of equations (2) to (8) are descriptions of the corresponding components of equation (1). Derive an expression for national income equilibrium model of the economy in the year.

            Y = C + I + G + X – M ………………………………………………….. (1)

            C = a0 + bYd ……………………………………………………………... (2)

            Yd = Y – T ………………………………………………………….……. (3)

            T = T0 + tY ………………………………………………………….….… (4)

            I = I0 + iY ……………………………………………………………….... (5)

            G = G0 ……………….…………………………………………………… (6)

            X = X0 ……………………….…………………………………………… (7)

            M = M0 + mY ……………….…………………………………………..... (8)    (5 marks)       

b. If in the year 2018, a0 = N38 billion, T0 = N5 billion, I0 = N22 billion, G0 = N580 billion,

X0 = N250 billion, M0 = N265 billion, b = 80%, t = 10%, i = 18% and m = 40%,

i.  What was the amount of the equilibrium national income of Nigeria?                         (2 marks)

ii. By how much did the equilibrium national income change in 2019 if G0 increased to N780 while the    other components of the aggregate income-expenditure remained unchanged?                                                                                                                                                 (3 marks)