ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C=100+ 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at lg = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y=C+Ig Instructions: Enter your answers as whole numbers. a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $

ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C=100+ 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at lg = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y=C+Ig Instructions: Enter your answers as whole numbers. a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
(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…
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?
Here is a little easy one. The question is based on Macro. The consumption function is given by C=AYB where B=0.5 and A=0.3. The marginal propensity to save (MPS) is: a) Equal to 0.5 b) increasing in income, Y c) equal to 0.3 d) equal to 0.7 The correct answer is b, I think as there is no direct way to calculate MPS(Righ?). Please work me through the logic of it. Please show clearly that MPS is an increasing function in Y. Thank you.
2. Suppose that consumption equals $500 billion when the disposable income is $0 and that each increase of $100 billion in disposable income causes consumption to increase by $70 billion. a. Draw a graph of the consumption function using this information. The axes must be labeled correctly, and the consumption function should have at least two points on the graph (correct coordinates). b. What is the Marginal Propensity to Consume in this economy? How did you arrive at your answer? Please show your work. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Please no written by hand and no emage Suppose that in the economy under consideration the consumption function can be written as C = 200 + .8(Y – T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X – M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Ye from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why. (d) Full employment output in this economy (Yf) is equal to $2000 what do you predict is happening to inventories if the full employment level of output is…
16. Suppose that planned investment and planned government purchases do not depend on income:I = 15 and G = 17. Consumption, as you would expect, does depend on income via the consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12. Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best description of this situation? a. the (Y, AE) point is above the 45 degree line, Y will adjust down b. the (Y, AE) point is above the 45 degree line, Y will adjust up c. the (Y, AE) point is below the 45 degree line, Y will adjust down d. the (Y, AE) point is below the 45 degree line, Y will adjust up 17. (continued) Help you friend by calculating the equilibrium income for the AE model in the previous question. Y = _____
1. 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)?
5 3. permanent Income Hypothesis a) suppose that beta=.9 and R= 2222 (that is ~22%). For an individual who acts according to the PIH, will their consumption next period be higher than current consumption or lower? b) What is the main crucial difference between the Keynesian Consumption function and the consumption function derived from the PIH (or Lifetime Income Hypothesis)? c) If Present Value of future income stream is 500,000 and a person has a beta of.8, how much will their consumption go up today if only today's income increases by 1000? How much will their consumption increase (approximately) if their income goes up by 1000 in all periods?
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 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 (5)]
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. 3. If government purchases increase to $150 million, what is the new equilibrium level of income? 4. What level of government purchases is needed to achieve an income of $2000 million? 5. From question e) you get the newly government purchase. Now find out the multiplier value 6. What is the amount of shift in AD curve? [Use the multiplier value from (5)]