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Consider the economy of Hicksonia.
a. C=300+0.50(Y-T)
The investment function is I=100-20t
Government purchases and taxes are both 150.For this economy, use a graph to illustrate
the IS curve for r ranging from 0 to 8. (4marks)
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- Draw the consumption function for the economy of Macroland C= 60+0.7Y with aggregate Income levels of $100, 200, 300, 400, 500 on the X axis and the corresponding aggregate consumption on the Y axis. Label the graphs and plot all points of income and consumption on the graph.The economy is described by the following functions: C = 120 + 0.8YD Tr = 15 Tx = 5 I = 50 - 5i G = 80 Nx = 10 Q1. Derive the IS curve Q2. Suppose taxes in the economy go up by 5, so the new value for taxes is 10. Derive the new IS curve Q3. Illustrate the change in the (Y; i) coordinatesUsing a graph and words, explain the effect of SRAS and LRAS curves when the President of the United States would give businesses who invested in new plant and equipment an investment tax credit equal to 10 percent of their investment and the marginal tax rate has been reduced to people who make over $50,000 and are permanent. Will you work more or less when marginal tax rates are cut and will businesses invest more in plant and equipment when an investment tax credit has been implemented by the President of the United States? Also explain in your graph what will happen to equilibrium price level and equilibrium real GDP and the unemployment rate when the marginal tax rates are cut and are permanent for people making over $50,000 and the investment tax credit has been implemented by the President of the United States.
- Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year: YY = = 10,00010,000 CC = = 6,0006,000 TT = = 1,5001,500 GG = = 1,7001,700 The economists also estimate that the investment function is: II = = 3,300−100r3,300−100r where rr is the country’s real interest rate, expressed as a percentage. Complete the following table by calculating private saving, public saving, national saving, investment, and the equilibrium real interest rate. Component Amount Private Saving Public Saving National Saving Investment Equilibrium Real Interest RatePresident Biden recently boasted of his administration’s success in lowering the deficit of the US government. This reduction could be considered “budget austerity”. Budget austerity usually involves a reduction in federal government spending and/or the raising of taxes to keep the budget deficit under control. Assume that just as austerity was beginning that we found the economy at a level of Ye that was below full employment (Ye < YN), as we did in the first two quarters of 2022. Illustrate graphically using the simple expenditure model developed in class what austerity will mean when for the level of planned spending when we start at Ye<YN, in theory, for the level of planned spending and equilibrium output as it takes effect. Lastly, given the movement you show in planned spending, if any, does the policy of austerity make sense if your goal is use policy to achieve YN? Explain.Assume a consumption function that takes on the following algebraic form: C = 100 + 0.8 Y. Assume that Y= 1450 what is the level of consumption at this income level.
- 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. 720Calculate the value of MPC given that:- MPS = 0.55The fundamental equations in an economy are given as: Consumption function C =200+0.8yd Investment function. I=300 Tax. T=120 Government expenditure. G=200 Exports. X=100 Imports M=0.05y Find the following. 1.The equilibrium level of income. 2.The net exports.
- Calculate the national income equilibrium of country Y using information below a）Country Y is a three sector economy b) Autonomous consumption is 320million with the proportion of increase income spent on comsumption 0.6 c) Induced tax of 20% imposed by country d) Investment 200million e) government spending 100million Question 2 Based on the above answer show the aggregate expenditure graph Question 3 What happen if that was a change of investment by RM 200millionConsider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rc. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving and show a graphical representation of your answer.is it always possible to increase tax revenues by increasing tax rates?(please draw therelevant graph(s))
