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Autonomous planned investment is [tex]\Phi300[/tex]. Autonomous consumption is [tex]50[/tex]. The marginal propensity to consume is [tex]\frac{18}{20}[/tex]. There are no taxes and no exports or imports.

What is the level of private savings in equilibrium?

Round to two decimal places and do not enter the currency symbol. If your answer is [tex]6.114[/tex], enter [tex]6.11[/tex]. If your answer is [tex]6.115[/tex], enter [tex]6.12[/tex]. If appropriate, remember to enter the [tex]-[/tex] sign.

Note: [tex]C[/tex] is the symbol for the cedi, the official currency of Ghana.

Answer :

The level of private savings is approximately 55.56, the answer is 55.56 on approximation.

To determine the level of private savings in equilibrium, we need to calculate the level of disposable income first. Disposable income is the total income minus taxes, and in this case, there are no taxes.

Disposable Income (Yd) = Total Income

Given that there are no taxes, Disposable Income is equal to Total Income.

Next, we can calculate consumption (C) using the marginal propensity to consume (MPC). The MPC is given as 18/20, which simplifies to 0.9.

Consumption (C) = Autonomous Consumption + (MPC * Disposable Income)

Plugging in the given values:

C = 50 + (0.9 * Yd)

In equilibrium, Consumption (C) equals Disposable Income (Yd), so we can set up the equation:

Yd = C

50 + (0.9 * Yd) = Yd

Simplifying the equation:

0.9 * Yd = 50

Yd = 50 / 0.9

Yd ≈ 55.56

Since Disposable Income (Yd) is equal to private savings in equilibrium, the level of private savings is approximately 55.56. Rounded to two decimal places, the answer is 55.56.

To learn more about private savings, here:

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