53. Consider an economy described by the following parameters: C=1000+0.8(Y – T) Government purchases=2000 NX=500 Gross Investment=1300 Tax=1000 The level of autonomous consumption is: a. 800 O b. 1100 c. 1000 O d. 900
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- Suppose the consumption function is given by C(Y)=60+0.8(Y-T) where Y represents output and T stands for net taxes. Suppose further that the level of investment, I, is 400, the level of government expenditure, G, is 300, and net taxes, T, are 200. What is the equilibrium level of output in this economy? a. 1720 b. 3000 c. 1590 d. 720able 27-1 Y = C + I + G C = 500 + 0.8(Y − T) I = 300 G = 700 T = 0.25Y Table 27-1 Y = C + I + G C = 500 + 0.8(Y−T) I = 300 G = 700 T = 0.25Y Refer to Table 27-1. What is the level of consumption in this model? a. 2,550 b. 2,950 c. 2,350 d. 2,750 e. 2,150Suppose that for a particular economy, for some time period, consumption was given by theconsumption function C = 300 + 0.9YD, investment was equal to 200, government expenditure wasequal to 100, net taxes were fixed at 100, exports were equal to 200, and imports were given by theimports function Z = 10 + 0.1YD. Note that YD represents disposable income. a.Suppose households earn $150 more in their disposable income. How much more would theyconsume in total? How much go to domestic goods and how much go to imported goods? Howmuch would they end up saving? b.What is the level of equilibrium income? What about the level of consumption and import? c.What are the values of the government spending multiplier, tax multiplier and balanced-budgetmultiplier? d.Suppose the investment level suddenly declined by 20. How should the government stabilize theeconomy? Please provide all options in detail
- 1.In Figure 1, when disposable income is 0, how much is consumption, saving, autonomous consumption, and induced consumption? 2.In Figure 1, when disposable income is 2500, how much is consumption, saving, autonomous consumption, and induced consumption? 3.In Figure 1, when disposable income is 4,000, how much is the consumption, savings, autonomous consumption and induced consumption?Suppose we have the following consumption function in an economy C = 2000 + 0.9YD. Howmuch government spending has to be increased in order to have an increase in equilibriumoutput equal to 1000? a. 100.b. 200.c. 250.d. 1000.e. none of these.f. do not have adequate information.1. Show that equilibruim level of income is at a point where consumption plus investment schedules intersect the 45 degree line. 2. Suppose the level of autonomous investment in an economy is K200,000 and the consumption function is given below as c = 80+0.8Y, what will be the equilibrium level of income. 4.if MPcC is 0.8, what will be the increase in the level of income if investment is increased to K400,000. 5. What increase in investment is needed to raise the income by K4000, if MPC is 0.75? How much will be the increase in consumption and saving due to this increase in income. 3. Given the consumption level C= 50 + 75Y, if we assume autonomous investment is K200,000 at what level of income will savings become equal to investment?
- We again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.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?Question 1: In the case of a 2 sector economy model, when the income increases from RM 400 mil to RM 450 million, consumption increases from 200 million to 230 million. The autonomous investment is RM100 million. Assume autonomous consumption is 1.1) Calculate the value of MPC 1.2) Calculate the value of MPS 1.3) Derive consumption function, if the autonomous consumption is RM100 million 1.4) Construct saving function, if the autonomous saving is RM100 million Question 2: Given the following information C=200 + 0.75Y I=100 G=50 T=100 X=100 M=50 Find the equilibrium income by using the formula of Y = C + I + G + (X – M) Question 3: The following information is about monetary items for the country. ITEMS RM(Million) Paper money 5500 Negotiable certificate of deposit 3600 Fixed & savings deposits in other banking institutions 7900 Fixed & savings deposits in commercial banks 15000 Demand deposits 9000 Bank Negara Certificates 12000…
- Given a closed economy where there is no public sector. Production in the economy can be described by the following production function:Y = F (K, AL) = K^α (AL)^(1−α)where Y is the productive capacity of the economy, K is the capital stock, L is the labor force, and A is knowledge. Think of AL as a single factor of production where knowledge and the amount of labor are multiplied together. Let's call the multiplier (AL) the efficiency of labor. It is given that A = 1.5 and saving is a fixed percentage of production, or s = 33%. The capital stock shrinks by 3% per year, but the population growth is zero. Finally, α = 0.4.Answer the following questions based on the above criteria. (a) Show mathematically that the marginal productivity of labor and capital is positive but diminishing. Explain in words and with a picture what the term positive but diminishing marginal productivity means. (b) Show mathematically that saving and investment are equivalent in a closed economy (c) Show…Suppose an economy produces only 2 products that will also be used for directconsumption, as per the article at the end of the exam: chicken wings and donuts. Inthe second quarter of 2021 (the base period), 180,000 pounds of chicken wings wereproduced, at a value of $3.50 per pound, while in the second quarter of 2022,production of chicken wings increased to 200,000 pounds, at a value of $3.75 perpound. In the second quarter of 2021 (the base period), 85,000 donuts were producedat a value of $0.85 per donut, while in the second quarter of 2022, donut productionincreased to 100,000 donuts, each at a value of $0.95 per donut. The population inthis economy is 1000 individuals in 2022, while the number of hours worked in 2022is 5000. Also, the quantities that were produced in 2021 represent the quantities thatwere purchased by the typical household, meaning that everything that was producedwas sold.d. Solve for the amount of labor productivity in the second quarter of 2022.e. Solve for the…Consider an economy in which the consumption, investment and production functions are as follows.C = 90 + 0:7(Y - T)I = 250 - 20r F(K;L) = AK1=2L1=2The capital and labor supply are equal to 100 each, A=10, G = 200 and T = 200. Compute theequilibrium values of output, overall labor income, consumption, public savings, national savings,investment, and the interest rate.Suppose now government spending decreases to G=100 (everything else stays the same). Whathappens to output, consumption, savings, investment and the interest rate? Compute the newvalues for these variables.