1. Consider an economy with the following characteristics: Autonomous part of consumption expenditure = $15 billion Investment = $5 billion %3D Government expenditures of goods and services = $50 billion Exports = $5 billion %3D Slope of the AE function = 0.5 There are no autonomous imports. a. What is the equation of the AE function? b. Draw a graph containing the AE curve for this economy as well as a 45° lir C. What is equilibrium expenditure/real GDP?
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- Only typed answer Given the following for the economy of a country: Consumption function: C=90+0.75Yd. Investment function: I=75. Government spending: G=100. Net export: NX=50. Net taxes: T=50. Disposable income: YdY-T. Equilibrium: Y=C+I+G+NX. a. Solve for equilibrium income. Show your work below. b. If autonomous investment decreases by 60, what is the new level of income? Show your answer on the same graph. Show your work below. c. What is the value of the spending multiplier? Show your work below.Consider an economy described by the following data:C = $3.25 trillionI = $1.3 trillionG = $3.5 trillionT = $3.0 trillionNX = - $1.0 trillionf = 1mpc = 0.75d = 0.3x = 0.1a. Derive simplified expressions for the consumptionfunction, the investment function, and the net exportfunction.b. Derive an expression for the IS curve.c. If the real interest rate is r = 2, what is equilibriumoutput? If r = 5, what is equilibrium output?d. Draw a graph of the IS curve showing the answersfrom part (c) above.e. If government purchases increase to $4.2 trillion,what will happen to equilibrium output at r = 2?What will happen to equilibrium output at r = 5?Show the effect of the increase in government purchases in your graph from part (d).What is the relative importance of consumption spending (C) in aggreagte demand and some factors that affect it? What is the relative importance of investment spending (I) in aggreagte demand and some factors that affect it? What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it? What is the relative importance of Net Export (NX) (Net Export = spending on exports (X) - imports (M)) in aggreagte demand and some factors that affect it?
- 1) Following is information for the economy of Sparkle. All units are milliondollars. Their autonomous consumption is $700, and the marginal propensity to consume is 0.8.Investment spending is constant at $380, and government expenditure is constant at $300.Exports are constant at $500, and imports are constant at $800. Net taxes are constant at $100.Calculate and state your answers for the following questions.a) What is the value of consumption in this economy when the real GDP is $1100?b) What is the value of autonomous aggregate planned expenditure i.e. AE0?c) What is the value of equilibrium aggregate expenditure for this economy?d) What is the value of unplanned changes in the inventory investment when real GDP is$4000?e) What is the size of the multiplier in this economy?f) If investment spending increases by $50, what would be the value of the change in theequilibrium real GDP?Consider a 4-sector economy, the consumption spending is C = 500+0.75(Y-T), taxes are T = 10 + 0.2Y, and imports are M=0.2Y. Planned investment is Ip=300, government spending is G=250, and exports are X=10. What is the slope of the planned aggregate expenditure (PAE) line? a) 0.7 b) 0.5 c) 0.6 d) 0.3 e) 0.4The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Before Saving Decrease After Saving Decrease Consumption (C) $280 million $320 million Investment (I) $200 million $ million Government Purchases (G) $250 million $ million Exports (EX) $500 million $500 million Imports (IM) $300 million $300 million As a result of the decrease in saving, total expenditures will .
- Assume that total expenditure E comprises the sum of government consumption, G, household consumption, C, and investment, I. Assume a closed macroeconomic system, so that income equals expenditure Y=E. If we define household saving, SH, as SH=Y-T-C, where Y is national income and T is total taxation, which of the following will be true? a. SH=I+G b. SH=I-G-T c. SH=I+(G-T) d. SH=IQuestion Can this be explained in a simple way? Thanks The following table illustrates a few rounds of the multiplier process for a 2 sector economy for an initial increase in exogenous planned investment of 50. delta PAE 50 35 24.5 17.15 delta y 50 35 24.5 17.15 What is the approximate value of the multiplier in this economy? 1.4 2.4 3.0 3.3 0.7 The first round effect on GDP comes for the increase in exogenous investment, but the subsequent rounds depend on the amount of the additional GDP/national income that is spent. This depends on the marginal propensity to consume. In round 2 we have 35 = c times 50. So c =0.7 and the multiplier is l/(l-0.7) = 3.3333 or approximately 3.3.Question 17 – Question 20: In this question, interest rate and prices are held fixed, and the economy can be described by the income-expenditure model. Consumption: C = 190 + 0.8YD; where YD = disposable income Investment: I = 180 – 50i, where i = 0.1 (10% & it is held fixed) Government spending: G = 183 Taxes: T = 272 Transfers: TR = 57 Exports: X = 18 Imports: IM = 24 Question 17 If the current level of output is 1975, find the levels of national savings and unplanned investment. Be sure to show your work rounded your answer to 2 decimal places if necessary
- V1 Consider the following information for a country: Consumption function: C = 85+0.8Yd Investment function: l = 85 Government spending: G=60 Net taxes: T = -40+0.25Y Disposable Income: Yd = Y - T Equilibrium: Y = C + l + G The level of equilibrium income, Y, = $_____(Enter response rounded two decimal places) The government collects net taxes of $_____ Remember the budget surplus is equal to taxes minus government spending, The governments budget surplus is $____Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. With a help of a diagram explain and discuss life cycle hypothesis.A simple closed economy with government sector is given by the following equations: C = 10 + 0.75 Y I = 20 G = 40 where C is aggregate consumption, Y is national income, G is government expenditure on goods and services, and I is investment expenditure. Note that there are no taxes assumed in parts (a) to (c). (a) What is the equilibrium level of national income? Show all your workings. (b) What is the value of aggregate consumption and the value of aggregate savings at the equilibrium level of the national income? Show all your workings. (c) What would be the new level of national income if government expenditure increased by 10? Show all your workings and explain the mechanisms through which the economy reaches a new equilibrium. (d) If a tax rate of 1/3 of national income were introduced, what would be the new equilibrium level of national income in the economy outlined above. Show all your workings and explain the mechanisms through which the economy reaches the new equilibrium.