4. The equilibrium levels of income Y, consumption C, disposable income Ya, and taxationT, for a three-sector macroeconomic model satisfy the structural equations:Y = C + 1, + GoC = a + bYd (0 0)Ya = Y – TT = tY + T, (0 < t < 1,T, > 0)Express this system in the form AX = dUsing Cramer's rule, find the equilibrium levels of consumption (C*), disposableincome (Ya*) and taxation (T*)i.ii.

We are going to find the matrix representation form for IS curve equation.

4. The equilibrium levels of income Y, consumption C, disposable income Ya, and taxation T, for a three-sector macroeconomic model satisfy the structural equations: Y = C + 1, + Go C = a + bYa (0 < b < 1, Ya = Y – T T = tY + T, (0 0) a > 0) Express this system in the form AX = d Using Cramer's rule, find the equilibrium levels of consumption (C*), disposable income (Ya*) and taxation (T*) i. ii.

4. The equilibrium levels of income Y, consumption C, disposable income Ya, and taxation T, for a three-sector macroeconomic model satisfy the structural equations: Y = C + 1, + Go C = a + bYa (0 < b < 1, Ya = Y – T T = tY + T, (0 0) a > 0) Express this system in the form AX = d Using Cramer's rule, find the equilibrium levels of consumption (C), disposable income (Ya) and taxation (T*) i. ii.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

Problem 3TY

See similar textbooks

Similar questions

Course: Macroeconomic - IS-LM Model Prove mathematically the following: Given an increase in the proportional tax on income(t), what happens to the level of output and to the tax?" . Hint: for demostration, use the IS general function for a closed economy Y = C + I + G, where C = a + c*YD and YD = Y + TR - Y*t (where t = proportional income tax) and realize changes i.e., from "t1" to "t2"
Consider the following model of an economy operating with fixed wages, prices and interest rates and hasexcess capacity. Adsume all figures are I Zambian kwacha. C=100+0.8yd, T=100+25Y, G=980 and I= 500 Where c is consumption, yd is disposable income, T is taxes net of transformers, G is government spending on goods and services and I is investments. A. Calculate the equilibrium level of national income B. Illustrate your equilibrium in the keyneasian cross diagran C. What is the value of the multiplier D. Is governnent running a surplus or a deficit E. Show the impact of a reduction in government spending by 80 on the equilibrium level of national income F. Illustrate your new equilibrium in the same Keynesian cross diagram as in b.
It appears that there was an economic drop during the 2019-2021 period as a result of the pandemic. Assume that we can view this as a negative shock to private investment, due to a combination of lockdowns and uncertainty about the world. In under 150 words, answer the following question: Was government consumption expenditure used as stabilisation policy following the slow-down during 2020 and 2021? (Note, you only need to discuss this in terms of our demand model of Income-Expenditure, IS-MPR, and Aggregate Demand.) Year Government consumption per capita ($) (rounded to a whole number) 2003 6672 2004 6820 2005 7016 2006 7394 2007 7515 2008 7757 2009 8040 2010 7892 2011 7931 2012 7969 2013 7955 2014 8041 2015 8154 2016 8124 2017 8096 2018 8238 2019 8371 2020 8658 2021 9207 2022 9962
Assuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which of the following statements is correct? choose 5 Select one or more: a. In a demand-driven economy demand is equal to supply in equilibrium b. In a demand-driven economy, supply creates its own demand c. The aggregate demand equation is given by AD = c0 + c1Y + I d. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = (c0 + I)/(1-c1 ) e. In a demand-driven economy the AD curve is a vertical line f. In a supply-driven economy demand is equal to supply in equilibrium g. if c1 is a number between 0 and 1, and I+c0 >0 then the aggregate demand equation is a straight line that must intersect the…
please explain each question. 1. We assumeconstantMPC in our model. Is this assumption true in the real world? 2. What determines the proportion of bonds/money that the household keeps? 3. What effect an increase of government spending will have on the output equilibrium in the goods market? Explain using autonomous spending.
. Consider the macroeconomic model of a two-sector economy (i.e. no government or trade) using standard notation. Assume that the consumption function is linear, i.e. of the form: C = a +bY . It is known that when ? = 110, the value of consumption, C , is equal to 160.8, and that when ? = 170, the value of C is 207.6. (a) Determine the consumption function and derive the savings ( S ) function for the model. What is the marginal propensity to consume? (b) Determine the equilibrium level of national income when planned investment ? = 255.
We have an economy with two major sectors: Sector I produces the means of production, and Sector II produces the means of consumption. The constant capital advanced in Sectors I and II are $20 billion and $30 billion, respectively. Assume that the variable capital advanced in Sectors I and II are $20 billion and $10 billion, respectively. Also assume that the rate of surplus value is 100% in each sector. Is the economy balanced or will a macroeconomic crisis occur due to the un-coordination between the two sectors? Explain with reference to the numerical values in this example.
An economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY Where t denotes the marginal tax rate. Suppose potential GDP is Y* = 10,000. What marginal tax rate t would restore GDP to potential? a.0 b.0.1 c.0.2 d.0.3
Based on the below information, help Renwick economy find the equilibrium level of output. Aggregate Demand Aggregate Supply Equilibrium YAD = C + I + G YAS = A Kα L1-α YR =0.5YAD+ 0.5YAS C = 600 + βYD A = (1 + g) Ao YD = YR + TR - tYR K = 35 TR = 55 L = 80 G = 120 g = 6% I = 50 Ao = 150 t = 0.15 α = 0.65 Where C is private consumption, YD is disposable income; TR, G and I are transfer payments, government spending and total investment, respectively. A in the index of technology and K and L are capital and labour inputs. A0 is the initial levels of A and L, both assumed to be 150, while g is the growth rates. The MPC is 0.60. a.) Find aggregate demand…
QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = C0 + YD (aggregate household consumption)YD = Y − T (aggregate household disposable income)Ip = I0 + aY − bR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T – G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)C0) and I0 autonomous consumption and investment0 < a, c, a+c < 1, b > 0 constant parametersDerive the equation for output and answer the following question. If the government in this model simultaneously increases its consumption G and its taxes T by the same amount, then: total demand decreases, and equilibrium output declines. total demand decreases, and equilibrium output declines, but only if C > G. total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households’ marginal propensity to consume. total demand…
You are given data on the following variables in an economy: Government spending 300 Planned investment 200 Net exports 50 Autonomous taxes 250 Income tax rate 0.1 Marginal propensity to consume 0.5 Use the data above to answer the following questions. Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonomousconsumption. Solve for the equilibrium level of output in the following two scenarios: there isan income tax t=0.1, there is no income tax in the economy. Denote these two variablesby and respectively. In the economy with an income tax of 10%, what is the budget balance of thegovernment? Solve…
When one focuses on aggregate demand and aggregate supply in macroeconomics, the main focus is on..... a. whether the goods are useful and wanted by consumers. b. whether the goods generate either positive or negative externalities c. what total spending is in relation to total production and its effects on the macroeconomic problems of unemployment and inflation d. both a) and b) are correct