{"id":5455,"date":"2019-02-14T10:28:07","date_gmt":"2019-02-14T04:58:07","guid":{"rendered":"http:\/\/astan.lk\/al_virtualclassroom\/?p=5455"},"modified":"2019-02-16T10:34:28","modified_gmt":"2019-02-16T05:04:28","slug":"calculating-the-equilibrium-in-a-closed-economy","status":"publish","type":"post","link":"https:\/\/astan.lk\/al_virtualclassroom\/calculating-the-equilibrium-in-a-closed-economy\/","title":{"rendered":"Closed economy"},"content":{"rendered":"<p>When government intervenes in a simple economy, it is termed a closed economy<br \/>\nTherefore, the aggregate income and expenditure components include Taxes(T), Government purchases(G) and transfers(Tr).<br \/>\nOnly autonomous taxes are considered as taxes.<\/p>\n<h3><span style=\"color: #000000;\"><strong>The following components are used to compute the equilibrium in the economy.<\/strong><\/span><\/h3>\n<ul>\n<li>Consumption (C)<\/li>\n<li>Savings(S)<\/li>\n<li>Autonomous taxes (T)<\/li>\n<li>Government Purchases (G)<\/li>\n<li>Transfers (TR)<\/li>\n<li>Investment (I)<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\"><strong>The equilibrium can be explained with two approaches.<\/strong><\/span><\/h3>\n<ul>\n<li>Income and expenditure method.<\/li>\n<li>Withdrawals and Injections method.<\/li>\n<\/ul>\n<p>Aggregate expenditure in a closed economy can be explained as the sum of private consumption expenditure (C) Investment (I) and government purchases.<\/p>\n<p>It can be shown with the following equation.<\/p>\n<p>E = C+I+G<\/p>\n<p>If Y = E<\/p>\n<p>Y = C+I+G<\/p>\n<ul>\n<li>Aggregate income (Y) in a closed economy equal the sum of expenditure on private<br \/>\nconsumption (C) Personal savings (S) and Autonomous taxes (T).<\/li>\n<li>It can be illustrated with the equation. Y = C+S+T<\/li>\n<li>Equilibrium in the closed economy can be shown through the withdrawals and injections method as,<br \/>\nE = C+I+G<br \/>\nY = C+S+T<br \/>\nY = E<br \/>\nC+I+G = C+S+T<br \/>\nI+G = S+T<\/li>\n<li>Illustrates (S) Savings and illustrates (T) Autonomous taxes. illustrates (I) Investment and is the (G) Government purchases.<\/li>\n<li>The consumption function in a closed economy can be illustrated as,<br \/>\nC = a+b (Y-T+TR)<br \/>\na = Autonomous consumption<br \/>\nb = Marginal Propensity to consume<br \/>\nT =Autonomous taxes<br \/>\nTR = Transfers<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\"><strong>The equilibrium in a closed economy can be illustrated in the following ways.<\/strong><\/span><\/h3>\n<ul>\n<li>With a statistical table<\/li>\n<li>With graphical presentation<\/li>\n<li>With equations<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>The equilibrium in a closed economy is calculated based on statistical schedule.<\/p>\n<p><a href=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/hrtru-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"fancybox aligncenter wp-image-8633 size-full\" src=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/hrtru-2.jpg\" alt=\"hrtru (2)\" width=\"548\" height=\"339\" \/><\/a><\/p>\n<p>The equilibrium in a closed economy can be illustrated graphically.<\/p>\n<p><a href=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/gert-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"fancybox aligncenter wp-image-8635 size-full\" src=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/gert-2.jpg\" alt=\"gert (2)\" width=\"535\" height=\"418\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p><strong>\u00a0According to the above diagram point &#8216;A&#8217; illustrates the equilibrium.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When government intervenes in a simple economy, it is termed a closed economy Therefore, the aggregate income and expenditure components include Taxes(T), Government purchases(G) and transfers(Tr). Only autonomous taxes are considered as taxes. The following components are used to compute the equilibrium in the economy. Consumption (C) Savings(S) Autonomous taxes (T) Government Purchases (G) Transfers [&hellip;]<\/p>\n","protected":false},"author":842,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[54,2687],"tags":[],"class_list":["post-5455","post","type-post","status-publish","format-standard","hentry","category-economics","category-unit-5-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Closed economy - Learning &amp; Education Portal<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/astan.lk\/al_virtualclassroom\/calculating-the-equilibrium-in-a-closed-economy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Closed economy - Learning &amp; Education Portal\" \/>\n<meta property=\"og:description\" content=\"When government intervenes in a simple economy, it is termed a closed economy Therefore, the aggregate income and expenditure components include Taxes(T), Government purchases(G) and transfers(Tr). 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