Assume the consumption function is C = 600 + (3/4)YD and the income tax rate ist = 20%. What will be the effect on the actual budget surplus of an increase in autonomous investment by 200? How do i arrive at correct answer of an increase of 100
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- The consumption function is defined a C= 800 + (0.8)YD, the marginal income tax rate is t = 0.5, and autonmous investment decreases by 50, then the budget surplus would be?What is the effect on savings of a tax cut of $15 billion? Is this inflationary or deflationary? Assume that the MPC is 0.9.Suppose that the government grants investment tax credits without changing the overall tax revenue T. In this case, the investment demand function will shift _____, but in equilibrium, the quantity demanded of I will _____ because r will increase.
- In the economy of Akron, the tax and savings functions are as follows: T=220+0.2Y S = -140 +0.3Y a) What is the equation for the consumption function? Remember to enter a minus (-) sign to indicate negative values. C=(Clickselect) Y b) If Y=1100, complete the following table: Y 1100 YD(a) Find equilibrium income when investment demand is 400 and C = 0.8Y. (b) Would output be higher or lower if the consumption function were C = 100 + 0.7Y?Assume that specific functional forms are assumed for the consumption function and the investment demand function: C = c1(Y; – G;) + c2(Y;+1- G++1) – C3ri I = -dır: + d2At+1+ d3Kt Where c1, C2, c3, di, dzand d3are fixed parameters governing the sensitivity of consumption and investment to different relevant decision factors. a) Find an algebraic expression of the IS (Investment-Savings) curve. b) Use the above expression to find the slope of the IS curve. C) Assume that the parameter values are: C1 = 0.6, c2 = 0.5, c3 = 10, dı = 20, d2 = 1 and d3 = 0.5. Assume that Yt+1 = 15, Gt = 10, Gt+1 = 10, At+1 = 5 and Kt = 15. Assume that rt = 0.1. Find the product in the current period. d) Now suppose ri = 0.15. Find the product Y in the current period. (e) Create a range of values of r, between 0.01 to 0.2, with 0.001 intervals between values. Find Y for each r:using an Excel sheet and draw the IS curve. Does it have the expected slope? Comment f) Find another version of the IS curve with A…
- If there is an initial investment of $500 and the MPC = 0.8, the spending multiplier is and the potential increase on income is respectively.Consider the non-linear aggregate consumption function: C = 0.05Y²+ Y + 80 (Where, C = aggregate consumption and Y = aggregate income). 21 d) Find the elasticity of the consumption function and show that it equals the MPC/APC.Your consumption C is related to your disposable income by the equation, C = 200 + 3/5 Yd. Assume that tax = 0 a) What will be the amount of consumption at an income level of 200? b) What is the value of MPC? MPS? c) If I = 100, what is the equilibrium level of income?
- Consider the consumption function: C 120+ 0.8Yd where Yd is disposable income. a) Write down expressions for C, in terms of national income Y, when there is: i. No tax ii. A lump sum tax of £100 iii. A proportional tax in which the proportion is 0.25. b) Sketch all three functions on the same diagram, over the range 0≤Y≤800, and briefly describe any differences or similarities between them.What is the value of multiplier, if the MPC is 0.75 a) 4 b) 7.5 c) 5 d) 0.75 e) 0.04Q.1.6 Given the import function, Z = 300 + 2/3Y, which of the following statements iscorrect?(2)(a) The marginal propensity to save is 1/3;(b) The induced component is 300;(c) 2/3 is the proportion of any income spent on imports;(d) None of the statements is correct.
