From the following information about an economy, determine :
(i)    The equilibrium level of GDP.
(ii)    Marginal propensity to saving.
(iii)    Balance of trade at equilibrium level of GDP.
(iv)    The  value of equilibrium GDP if government expenditure increases by Rs 200 crore.

Consumption function (C) = 100 + 0.7Y_d
Autonomous investment (I) = Rs 100 crore
Government expenditure (G) =Rs 300 crore
Taxes(T) = Rs 150 crore
Exports (X) = Rs 300 crore
Import function (M) = 75 + 0.15Y

(i)    At equilibrium GDP:
                                            Y = C + I + G + X-M
     =>                                   Y = 100 +0.7Yd +100+300+300-(75 +0.15Y)
     =>                                   Y = 100 + 0.7(Y-7) + 100 +300 +300-75-0.15Y
     =>                                   Y = 100 + 0.7Y-0.7 X 150 +100+300+300-75-0.15Y
     =>                                   Y = 0.55Y + 800-105-75
     =>                        Y-0.55Y = 800-180
     =>                            0.45 = 620
                                          Y =  620  =  62000
     =>                                         0.45      45
                                                 
                                              = Rs.1377.77 crore.
Equilibrium GDP is Rs. 1377.77 crore.
(ii)Given.
      Consumption function (C) = 100 + 0.7Y_d
       Here,
       Marginal propensity to consume (ß) = 0.7
       Marginal propensity to save = 1- marginal propensity to consume.
      MPS = 1 = 0.7 =0.3
(iii)Balance of Trade = Export- Imports
          That is, X-M = 300-(75 +0.15Y)
                            = 300-75-0.15 X 1377,77
                            = 300-75-206.66
                            = 300-281.66 =Rs 18.34 crore (approx.)
Thus, balance of trade is Rs 18.34 crore approximately.
(iv)If government expenditure increases by Rs 200 crore that is, government  
      expenditure increases from Rs 300 crore to Rs 500 cror. Equilibrium GDP is:
                       Y =  C +Io +Go +X-M
=>                   Y = 100 + 0.7Yd +100 +500 +300- (75 +0.15Y)
=>                   Y = 100 + 0.7(Y-T) + 100 +500 +300-(75+0.15Y)
=>                   Y = 100 + 0.7Y-0.7 X 150 +100 +500 +300-75-0.15Y
=>                   Y = 0.7Y-0.15Y +1000-105-75
=>                   Y = 0.55Y +1000-180
=>           Y-0.55Y= 820
=>            0 .45Y = 820
                        Y= 820  =  82000   = Rs 1822.22 crore
=>                         0.45        45              

If government expenditure increase by Rs 200 crore equilibrium GDP increases from Rs 1377.77 crore to 1822.22 crore. Or, increase in equilibrium GDP = Rs 444.45 crore, owing to increase in government expenditure by Rs 200 crore.