Consider the following information about an economy. C=100+b(Y-50-0.25Y); I=50, G=50, X=10, M=5+0.1y, t=0.25Y, MPC=0.8 Find equilibrium national income Find the foreign trade multiplier What components are excluded in calculating national income and why?

Consider the following information about an economy. C=100+b(Y-50-0.25Y); I=50, G=50, X=10, M=5+0.1y, t=0.25Y, MPC=0.8 Find equilibrium national income Find the foreign trade multiplier What components are excluded in calculating national income and why?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.B: Algebraic Treatment Of Taxes And Fiscal Policy

Problem 1TY

See similar textbooks

Related questions

Q: Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals…

A: Gross domestic product: Gross domestic product or GDP is an standard measure which includes the…

Q: The table given below reports the value of real GDP and its components consumption (C), investment…

A: At equilibrium Y = C+I + G +X -M where C is consumption I is investment G is government spending X…

Q: In a closed economy, the demand for the output consists of consumption (C), Investment (I), and…

A: Since you posted multiple questions, we will provide you with the answer to the first question only.…

Q: If the MPC in an economy is 0.80, government could close a recessionary expenditure gap of $80…

A: A negative output gap also known as recessionary output gap is when the long run output exceeds the…

Q: Analyse the effect on equilibrium national income if the MPC falls from 0.95 to 0.4. Illustrate with…

A: National income is an income that is generated by summing the consumption, government expenditure,…

Q: Assume that GDP (Y) is 6,000. Consumption (C) is given by the equation C= 600+ 0.6(Y – T).…

A: National savings come from two sources the public sector and the private sector. The private sector…

Q: ustify your answer: [Assume households either consume or save their income only.] a)If the private…

A: National income accounting is a government accounting system that monitors a country's economic…

Q: Suppose that the level of income is $1000 and the tax rate is 0.1 %. Given this data, what is the…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose the interest on the debt was $700 billion. If interest is paid domestically, 90% will be…

A: Given: The total debt of the country is given as $700 billion 100% interest is paid domestically…

Q: You are given the following information about a closed economy with no government: Consumption = 445…

A: Given: In a closed economy with no government, Consumption(C)=445+0.75Y Investment (I) = 250

Q: Consider a hypothesis economy described by the following equation C=100 I=1200 X-1110…

A: National income: - national income is the market value of all final goods and services produced in…

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

Q: Which of the following is a leakage from the circular flow of income and expenditure in South…

A: Leakage is something which lowers the income across the economy (outflow of income) and injection is…

Q: Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300…

A: GDP refers to the total value of finished goods and services that produced within the economic…

Q: T. G J K 7. GDP The degree of built-in stability in the above economy could be increased by:…

A: Please find the answer below.

Q: For Q1-3. For a closed economy, the consumption, investment and government spending are given as…

A: Given Consumption expenditure C=20+6Y1/2 .......(1) Investment expenditure…

Q: In a closed economy (no imports or exports), Aggregate Expenditure 'AE' is defined as the sum of…

A: Answer: Given values: Y = $1265 C = $660 I = $325 To find: G (government expenditure) Formula to be…

Q: Consider an economy similar to that in the preceding question in which investment is also $200,…

A: GDP refers to the total value of all the final good and services that produced within the economy…

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

A: Given: The hypothetical economy where: To Find: Th expression for the investment-saving (IS) curve:

Q: A country has an initial real output of $162 Billion. What would the final output be expected to be…

A: Since you have posted a question with multiple sub-parts, we will solve the first 3 sub-parts for…

Q: Real GDP C 177 170 163 142 250 240 230 200 100 I 54 54 54 54 72 54 The above table shows the real…

A: Equilibrium aggregate expenditure is occur when the Real GDP is equals to Aggregate expenditure so…

Q: With the aid of an appropriate diagram show how a fall and a rise in aggregate leakage function…

A: The leakage means withdrawing the income from the flow of income. It includes saving (S), tax (T),…

Q: Suppose the consumption of an economy is given by C = 20 +0.6Y The following investment function is…

Q: If economic predictions showed the U.S. GDP to be decreasing by approximately $500 billion next…

A: We will answer the first question only. Please resubmit the question with any other parts you'd like…

Q: Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300…

A: In the income-expenditure model, the equilibrium occurs at the level of GDP where aggregate…

Q: Answer the question on the basis of the following table for a particular country in which C is…

A: Real GDP = C + I + G + X - M Price Level C I G X M Real GDP 128 18 2 3 1 5 19 125 20 4 3 2 4…

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

A: The Investment-Savings (IS) curve shows the combination of various levels of interest rate and GDP…

Q: Equilibrium exists at any output-income level in which the output level gives rise to an employment…

A: With the given interest rate, firms want to invest more. Demand for investment goods increases…

Q: Suppose that GDP was $250 billion in year 1 and that all other components of expenditures remained…

A: GDP stands for gross domestic product which is the sum of value of all goods and services produced…

Q: Find equilibrium level of national income from the following:- Autonomous consumption = $200 MPC…

A: The Given information is as follows:- Autonomous consumption = $200 MPC = 0.8 Investment = $100 We…

Q: overnments attempt to stimulate economies by offering firms temporary investment tax credits.…

A: Tax credits are the subsidy in taxes provided by the government.

Q: Consider the case of a closed economy for which the following initial data are known: c=0.70, t=0.3;…

A: Introduction We have given data of a closed economy. c = 0.70 , t = 0.3 , government expenditure…

Q: Questions number 6 to 10 are based on having an MPC equal to 0.8 and potential output is P800…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Given the following information, S = -200 + 3Y…

A: S=-200+3Y I=100 Find: a) National Income equilibrium by using the Leakage-Injection b) The value of…

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

A: given: C(Yd) = 12+0.75(Y-T)I(r)=124-1×rG=120T=20%

Q: In a private closed economy where MPC = 0.90, if consumers reduce their spending by $5 billion and…

A: Given the MPC = 0.90 Reduction in consumption = $5 billion Decrease in investment = $4 billion

Q: You are given the following information about a closed economy with no government: Consumption =…

A: Given, Consumption = 115 + 0.6Y Investment = 550 At equilibrium , Income(Y) = Consumption…

Q: During the 2012 fiscal year, households in an economy spent 80 per cent of their disposable income…

A: Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts for…

Q: We use the following terminology in this part: aggregate income Y and disposable income Ya (= Y –T),…

A: Aggregate expenditure refers to the sum of all expenditures in an economy by the factors over a…

Q: Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd…

A: Hi. since there are two questions we will answer the first one.

Q: Absorption refers to A. the quantity of aggregate output that is absorbed into the domestic cconomy.…

A: 1. Absorption is the total demand for all final marketed goods and services (domestic and…

Q: Identify the correct equation from the following equations: Disposable income equals national income…

A: National income refers to the value of products and services manufactured by a nation during a…

Q: The following table shows consumption (C), investment spending (I), and government purchases (G), in…

A: If the income tax rate is 25%, the disposable income (after tax) is equal to 75% of the real GDP.…

Question

100%

Consider the following information about an economy.

C=100+b(Y-50-0.25Y);

I=50,

G=50,

X=10,

M=5+0.1y,

t=0.25Y,

MPC=0.8

Find equilibrium national income
Find the foreign trade multiplier
What components are excluded in calculating national income and why?
What is the most common method of computing national income in Zambia and why?
What is the effect of an increase in t of 0.3 on the equilibrium income and the multiplier?

Definition Definition Monetary value of all goods and services produced in an economy during a financial year. National income also refers to the total income earned by the factors of production during a financial year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 National income

VIEW

Step 2 National income

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Using what you know about national income accounting, answer the following as true, false, or uncertain and justify your answer: [Assume households either consume or save their income only.] a)If the private sector is balanced and transfers are held constant, an increase in taxes implies a decrease in net exports. b)An increase in disposable personal income must imply an increase in private investment. c)Holding the government budget deficit constant, an increase in net exports must imply an increase in disposable income.
Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 0.5. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. A) explain what would happen to the national income equilibrium if the invesment changes by rm100 million
Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 0.5. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. Explain what would happen to the national income equilibrium if the investment changes by RM100 million.
Analyse the effect on equilibrium national income if the MPC falls from 0.95 to 0.4. Illustrate with the output expenditure and withdrawals-injections approach
Suppose the interest on the debt was $700 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is spent on foreign goods). If interest is paid to the foreign sector, only 10% is spent here (the remainder is spent in foreign countries). Every dollar collected in axes to pay the interest cause domestic spending to fall 90 cents. The spending multiplier is 2. d) What is the net impact on GDP if all interest is paid domestically?
Consider an economy similar to that in the preceding question in which investment is also $200, government purchases are also $500, net exports are also $30, and the price level is also fixed. But taxes now vary with income and, as a result, the consumption schedule looks like the following: GDP Taxes DI C $1,360 $320 $1,040 $810 1,480 360 1,120 870 1,600 400 1,200 930 1,720 440 1,280 990 1,840 480 1,360 1,050 Find the equilibrium graphically. What is the marginal propensity to consume? What is the tax rate? Use your diagram to show the effect of a decrease of $60 in government purchases. What is the multiplier? Compare this answer to your answer to Test Yourself Question 1. What do you conclude? GDP…
Assume that a three-sector economy in Country W. The amount of autonomous consumption is RM300 million with the proportion of an increase in income that is spent on consumption is 0.5. An induced tax of 20% is imposed by the country. The amount of investment is RM250 million, and the amount of government spending is RM150 million. (iii) Explain what would happen to the national income equilibrium if the investment changes by RM100 million.
Consider a closed economy in which total output equals $13,000. The economy also has the following information: Consumption totals $6500 Government spending totals $2500 Private savings totals $3800 Carefully following all numeric instructions, tell me this economy's net taxes (T). Carefully following all numeric instructions, tell me this economy's public savings. Carefully following all numeric instructions, tell me this economy's economic investment.
Assume that total expenditure E comprises the sum of government consumption, G, household consumption, C, and investment, I. Assume a closed macroeconomic system, so that income equals expenditure Y=E. If we define household saving, SH, as SH=Y-T-C, where Y is national income and T is total taxation, which of the following will be true? a. SH=I+G b. SH=I-G-T c. SH=I+(G-T) d. SH=I
Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25% Full employment level of income = 3575 Calculate the change in government spending required to reach full employment level of income.
Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion. If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment? Multiple Choice a decrease of $12 billion an increase of $25 billion an increase of $10 billion an increase of $15 billion
Suppose GDP is $ 15 trillion, with $ 8 trillion coming from consumption, $ 2.5 trillion coming from gross investment, $ 3.5 trillion coming from government expenditures, and $ 1 trillion coming from net exports. Also suppose that across the whole economy, personal income is $ 12 trillion. If the government collects $ 1.5 trillion in personal taxes, then disposable income will be: a) $ 13.5 trillion b) $ 12.0 trillion c) $ 10.5 trillion d) None of these are correct