5) Suppose the Canadian economy is represented by the following: C=100+0.8Yd T-$50 I-20+0.1Y G-200 Yd-Y-T a) What is the equilibrium level of output? (Hint: first, drive the equation for C as a function of Y, then drive the cquation for Z) b) What is the multiplier?
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- 3. Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $600.Question 3: At a level of National Income of AED 30,000 Million, the government announced an increase in expenditures from AED 1000 Million to AED 1500 Million as a stimulus package for infrastructure development and at the same time government also announced an increase in tax from AED 1000 Million to AED 1600 Million. The marginal propensity to consume (MPC) for the country is 0.75. Find the impact of these changes on National Income. Explain the leakages of multiplierQuestion 1: You are given the data concerning Freedonia, a legendary country i. C = 200 + 0.8Y ii. I = 100 a) What is the MPC to consume and what is the MPS? b) Solve for equilibrium income. c) Suppose I changes to 110, what is the new equilibrium level of income? By how much does a $10 increase in planned investment changes equilibrium income? What is the value of multiplier?
- What is the spending multiplier for the north laurisian economy1. Suppose the households in a hypothetical economy has the following consumption function C= a + cYd. Where is the disposable income. The government in this economy imposes a tax rate of to households’ income (ex. A means that 10% of households’ income goes to tax payments). a. What is the equation that describes the disposable income of households? b. What is the Planned Expenditure Equation? Assume that government expenditure is exogenous and Investment function is given by the equation I = I-br Where is the interest rate. c. Derive the equilibrium output in the goods market and show that the multiplier in this model is 1/1c(1-t). d. How does and the tax rate affects this multiplier (e.g., what happens to multiplier if c increases cet.par. , or if tax rate increases, cet.par)?1. Assume in a simple economy that the level of saving is –500 when aggregate output equals zero and that the marginal propensity to save is 0.2. Derive the saving function and the consumption function, and draw a graph showing these functions. At what level of aggregate output does the consumption curve cross the 45° line? Explain your answer and show this on the graph.2. Use your answer to the previous problem to calculate the MPC, MPS, government spending multiplier, and tax multiplier. Draw a graph showing the data for consumption spending, planned aggregate expenditures, and aggregate output. Be sure to identify the equilibrium point on your graph. Sorry, these two questions are linked. I totally forgot.
- The economy of Bananaland can be characterized by Equation 9.3. EQUATION 9.3: C = 2,000 + 0.75Yd T = 200 G = 400 I = 500 Calculate the government spending multiplier.use the following equation. C = 50 + 0.6(Y – T) 9) What is autonomous consumption in this economy? a) 0.4 b) 0.6 c) 30 d) 50 10) What is the government spending multiplier for this economy? a) -1.5 b) 1.5 c) -2.5 d) 2.5 11) If the government spends 20 more then what happens to consumption? a) increases by 50 b) decreases by 50 c) increases by 30 d) decreases by 30 12) In this economy we know that lowering taxes by 10 a) affects real GDP the same as increasing government spending by 10 b) affects real GDP more than increasing government spending by 10 c) affects real GDP less than increasing government spending by 10 d) affects real GDP but cannot be compared to government spending at all6. Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPC relationship?
- 1.a Suppose the country of Freelandia has an MPC of .85 and a real GDP of $200 billion. If its investment spending decreases by $3 billion, what will be its new level of real GDP?Suppose that an initial $ 10 billion increase in investment spending expands GDP by $ 10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $ 6 billion in the second round of the process. Instructions: In parts a and b, round your answers to 1 decimal place. In part c enter your answer as a whole number. A) What is the MPC in this economy? B) What is the size of the multiplier? C) If, instead, GDP and consumption both rose by $ 8 billion in the second round, what would have been the size of the multiplier?For each of the following, please explain each step and show it in the graph! b. The Marginal Propensity to Consume (MPC) is 0,8 and the government wants total spending to increase by $40 Billion. How much the multiplier and initial spending must the government do to achieve the goal? (Assume economy is at full employment and economist ignore possibility of crowding out effect)
