1. Given the following information: C = 500 + 0.8 Yd, Ip = 300, G = 500, X = 500, T= 100 + 0.2 Y, M = 100. Insert the final answer of the following questions: 1. Multiplier = 2. Equilibrium Income = 3. Saving at equilibrium = 4. Total leakages = 5. If the Government expenditure increases %3D to 800, the change in equilibrium level of income = 6. If income is 4000, the unplanned investment (lu) = * %3D

1. Given the following information: C = 500 + 0.8 Yd, Ip = 300, G = 500, X = 500, T= 100 + 0.2 Y, M = 100. Insert the final answer of the following questions: 1. Multiplier = 2. Equilibrium Income = 3. Saving at equilibrium = 4. Total leakages = 5. If the Government expenditure increases %3D to 800, the change in equilibrium level of income = 6. If income is 4000, the unplanned investment (lu) = * %3D

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

Problem 3TY

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Assume an economy in which:(i) there are no exports and no imports,(ii) investors always want to spend $200 billion, or I = 200,(iii) government spends $500 billion and tax revenue is $200 billion,(iv) consumption is a linear function of disposable income, C=100+0.8YdAnswer the following questions:a. What is the marginal propensity to save (MPS)?b. What is the saving equation?c. What is the equilibrium level of national output/income (Y)?d. At the equilibrium income level (Y*, your answer to c) calculate private saving,and explain the relationship between private saving and planned investment?
(a) Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively. What is MPC, MPS and autonomous consumption Derive the saving function. What is the equilibrium level of income? Y= AD=C+I+G If government purchases increase to $150 million, what is the new equilibrium level of income? What level of government purchases is needed to achieve an income of $2000 million? From question e) you get the newly government purchase. Now find out the multiplier value What is the amount of shift in AD curve? [Use the multiplier value from e)] (b) In a self-regulating economy “X”, labor supply is 40 million but labor demand is 10 million. What will happen in goods and service market simultaneously? Explain this situation with relevant graph. Based on your findings in a) is it denoting long run equilibrium? If not, will the economy be able to restore…
Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 y= 1700 consumption = 1200 4) What is the level of private saving in equilibrium? 5) What is the level of public saving in equilibrium? 6) What is the level of aggregate saving in equilibrium? 7) Imagine the government would like to increase equilibrium GDP to 2,000, what would it have to set the level of government spending to? 8) What is the size of the spending multiplier? 9) What is the size of the tax multiplier?
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1. Consider a model of a goods market in a closed economy that is characterized by the followingequations:Consumption : C = 160 + 0.6(Y −T )Investment : I = 150Taxes : T = 100Government spending : G = 110EQ Output : Y = 1/(1 −c1)[c0 + I + G −c1T](a) Solve for the output in the economy.(b) Compute the sum of private and public saving.(c) Considering your answer to part b and the information given above, is this economy in equilib-rium? Explain.
2. In a closed economy with no government, a $1 billion increase in initial spending leads to a $5 billion increase in total income or output. a. What is the multiplier? b.What is the value of marginal propensity to save? c.What is the value marginal propensity to consume?
if a $200 billion increase in invest spending creats $200 billion new income in the first round of the multiplier process and $120 billion in second round, the MPS in the economy is A. 0.4 B. 0.6 C. 0.2 D. 0.3
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Assume that the economy can be modeled as follows: AE = C + I + G C = 300 + .6Yd I = 400 G = 100 T = 200 1) Solve for equilibrium income (Y*). 2) Graph the economy. (Upload the graph in the next question.) 3) What is the level of consumption in equilibrium? 4) What is the level of private saving in equilibrium? 5) What is the level of public saving in equilibrium? 6) What is the level of aggregate saving in equilibrium? 7) Imagine the government would like to increase equilibrium GDP to 2,000, what would it have to set the level of government spending to? 8) What is the size of the spending multiplier? 9) What is the size of the tax multiplier?
a. Suppose that in an economy with no government, the aggregate expenditurefunction is: AE = 50+0.75Y with an investment level of 100.i. Determine the level of planned expenditure when income is 150.ii. Draw a diagram showing the aggregate expenditure functioniii. What are the levels of autonomous consumption and inducedconsumption at income levels of 150 and 200.b. An open economy with a government sector is in equilibrium. Assume thefollowing:1. Marginal propensity to save = 0.42. Marginal propensity to tax = 0.23. Marginal propensity to import = 0.2i. Solve for the value the government multiplier ii. Determine by how much the equilibrium level of national incomewould fall, if injections in the economy are reduced by Ks.60m.iii. Determine the new level of income if taxes increased by KS. 20c. Propose four reasons why economists should not consider GDP an effectivemeasure of the standard of living in a country.