Assume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by the equation C = 1,200 + 0.6(Y −T)−100r, where r is the real interest rate, in percent. Investment (I) is given
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Assume that
C = 1,200 + 0.6(Y −T)−100r, where r is the real interest rate, in percent. Investment (I) is given
by the equation I = 2,000 − 200r. Taxes (T) are 1,000, and government spending (G) is 1,500.
(a) What are the equilibrium values of C, I, and r?
(b) What are the values of private saving,
(c) For the given consumption function, what does the relationship between consumption and the
interest rate imply about the saving schedule?
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- Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.50Yd and generates $2500 output and income in equilibrium. Suppose also that the government spends 400 and imposes a lump-sum tax of 100. What is the level of intended investment?Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.75Yd and generates $3000 output and income in equilibrium. Suppose also that the government spends 300 and imposes a lump-sum tax of 50. What is the level of intended investment? (round your answer to the nearest whole value)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 value of the marginal propensity to save? a. 5 b. 0.2 c. 0.8 d. 1
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- Consider the following functions for consumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000. Compute private, public, and national savings for this economy, and find the equilibrium real interest rate (r). Assume that G declines by 500 units. How will it change your answers in part (a)? What happens to the national savings, given everything else, if the public decides to consume less out of their disposable income (assume that the propensity of consume falls by 10 percent)? Given your answer in part (c), what happens to investment and real interest rate? Answer all four.Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and generates $2200 output and income in equilibrium. Suppose also that the government collects a lump-sum tax of 300. How much will the private sector be saving total in equilibrium? (round your answer to the nearest whole value)Assume a closed economy in which, there is no government. If autonomous consumption is80, autonomous investment is 70, and marginal propensity to save is 0.25 in this economy.Then calculate the amount of equilibrium output (income)?
- Suppose that the level of GDP increased by $400 billion in a private closed economy where the marginal propensity to consume is 0.60. Aggregate expenditures must have increased by. make sure the answer is accurate. Group of answer choices $400 billion. $160 billion. $240 billion. $80 billion.Suppose the desired consumption function of Canadaland is given by C^d= 0.5 + 0.7Y - 10r - 0.1G, where Y is income, r is the real interest rate, and G is government purchases. This implies that a. Desired consumption is increasing in the real interest rate b. The marginal propensity to consume is 0.5 c. The marginal propensity to consume is 0.75 d. Desired consumption is increasing in governmental purchasesDetermine a) the value of GDP and b) the value of the multiplier in a closed economy, if the saving function is S = -20 + 0.2Y, investment is 50, and government expenditures are 40