Consider an economy described by the following data: C= $3.25 trillion T = $1.3 trillion G= $3.5 trillion T= $3.0 trillion (NX =-$1.0 trillion T=1 mpc = 0.75 d= 0.3 x= 0.1 Required/Solve the following by providing formulas and all the necessary steps: (A) Derive simplified expressions (equations) for the consumption function, the investment function, and the net export function. (B) Derive an expression for the IS curve. %3D %3!

Consider an economy described by the following data: C= $3.25 trillion T = $1.3 trillion G= $3.5 trillion T= $3.0 trillion (NX =-$1.0 trillion T=1 mpc = 0.75 d= 0.3 x= 0.1 Required/Solve the following by providing formulas and all the necessary steps: (A) Derive simplified expressions (equations) for the consumption function, the investment function, and the net export function. (B) Derive an expression for the IS curve. %3D %3!

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQ

See similar textbooks

Similar questions

The graph shows the relationship between real disposable income and planned consumption. The horizontal axis measures real disposable income, while the vertical axis measures the level of planned consumption. The graph shows a consumption function, represented by an upward-sloping, straight line. The consumption function intercepts the vertical axis at a point labeled A. The graph also shows a 45-degree line that passes through the origin. The consumption function and the 45-degree line intersect at a point labeled B. Refer to the above figure. Dissaving occurs, A. to the left of point B. B. to the right of point B. C. only at point A. D. only at point B.
Linear equations for the consumption and saving schedules take the general form C = a + bY and S = -a + (1 - b)Y, where C, S, and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule.a. Use the following data to substitute numerical values for a and b in the consumption and saving equations. b. What is the economic meaning of b? Of (1 - b)? c. Suppose that the amount of saving that occurs at each level of national income falls by $20 but that the values of b and (1 - b) remain unchanged. Restate the saving and consumption equations for the new numerical values, and cite a factor that might have caused the change.
Construct a consumption function from the data given here and determine the MPC. Given the consumption function in the above question, what is the relationship between disposable income and consumption? Is it direct or indirect and then explain what it means.
The private consumption of Macroland is given by C=500+0.75Y and the private investment function is given by I=400−1000r, where r is the interest rate and Y is the GDP. The planned aggregate expenditure can therefore be written as PE=C+I=900+0.75Y−1000r. The equilibrium in the goods and services market happens when the planned expenditure is equal to the actual expenditure, or PE=Y Find the equilibrium GDP by solving the system of equations PE=900+0.75Y-1000r PE= Y for Y and PE. Note your solutions will depend on r! 1. Plot your solution for Y in a diagram measuring Y on the horizontal axis and r on the vertical axis. This curve is called the IS curve.
Complete the statements and then calculate the change in consumption. Options: disposable income marginal propensity to save. marginal propensity to consume. saving. wealth. The consumption function shows the relationship between consumption spending and ______ The slope of the consumption function is the______ Changes in consumption can be predicted by multiplying the change in ______ by the _______ If the MPC=0.80MPC=0.80 and disposable income increases by $1000$1000, then consumption will increase by what amount? Assume that there is no multiplier effect.
*Assume the economy is in a recession, and it is estimated that a change of $800 billion in federal government spending will boost GDP by $4,000 billion this year. Based on this information, what is the value of the MPC used in this forecast?
Construct a consumption function from the data given here and determine the MPC. Given the consumption function in the above question, what is the relationship between disposable income and consumption?
Linear equations for the consumption, saving schedules take the general form C = a+ bY and S= -a + ( 1 - B) Y, where C, S , and Y are consumption, saving, and national income, respectively. The constant a represents the vertical intercept, and b represents the slope of the consumption schedule. A) use the following data to substitute numerical values for A and B in the consumption and savings equation B) what is the economic meaning of B? Of (1-b)? C) suppose that the amount of saving that occurs of each level of national income falls by $20 but that the values of B and (1-b) remain unchanged. Restate the saving and consumption equations inserting the new numerical values, and cite a factor that might have caused the change.
The equations defining a simple model of the economy are : c=0.75y+18 and I =22 where C,Y and I denote consumption,national income and hence draw an accurate graph of C+I plotted against Y on the interval 0
Assuming that each of the following functions are linear, give an economic interpretation of the slope ofthe function:a. C(Y) is the national consumption when national income is Yb. S(Y) is the total national savings when national income is Y
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.75. That is, if disposable income increases by $1, consumption increases by 75¢. Suppose further that last year disposable income in the economy was $500 billion and consumption was $450 billion. On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.
Assume that the consumption function for the above economy is C = 1000 + .75Yd fill in the empty cells. (All Figures are in Billions of Dollars) Output Taxes Disposable Income Consumption Spending Saving Investment Government Aggregate Expenditure 5000 1000 750 750 7000 1000 750 750 9000 1000 750 750