Wk 7 26/03/07 - PBL posting

Wk 7 26/03/07
Team members: Sinead, Martina,Mark, Shane and Jason

PBL to:

(a) work out figures in Table 3.4 Godley
(b) calc for period 2 if theta is now 30%
(c) calc for period 3 if theta is now 30%

note a = alpha, t = theta, d = delta

theta = t = .2 for (a) & .3 for (b); G = 20

(a)

Y = G/(a1-a1*t) = 38.5
T = t*Y = 38.5*0.2 = 7.7
YD = Y - T = 38.5 - 7.7 = 30.8
C = a1*YD + a2*H-1 = 30.8*0.6 + 0.4*0 = 18.5
dHh = YD - C = 30.8 - 18.5 = 12.3
dHs = G - T = 20 - 7.7 = 12.3
H = dHh + H-1 = 12.3 + 0 = 12.3 - {note dHh and not dH as in notes}

(b) formulae as before...

Y = 34.48
T = 0.3*34.48 = 10.34
YD = Y - T = 34.48 - 10.34 = 24.14
C = 0.6*24.14 + 0.4*0 = 14.48
dHs = 20 - 10.34 = 9.65
dHh = 24.14 - 14.5 = 9.65
H = 9.64 + 0 = 9.65

(c)

Y = 34.48 (as per period 2) + a2*H-1
Note - we need to calc as such as system is recursive!
a2*H-1 is MPC out of past wealth, H-1 for previous period.
=> 34.48 + 0.4*9.65 = 38.36

T = 0.3*38.36 = 11.5
YD = 38.36 - 11.5 = 26.86
C = 0.6*26.86 + 0.4*9.65 = 16.11 + 3.86 = 19.98
dHs = 20 - 11.5 = 8.5
dHh = 26.86 - 18.35 = 8.5
H = 8.5 + 9.65 = 18.15