what is the correct answer2) What will come into the gaps? Assume in a simple economy that the level of saving is - $800 when aggregate output equals zero and that the marginal propensity to save is 0.25.Derive the saving function and the consumption function.O A. S= - 800 - 0.25Y and C = 800 + 0.75YO B. S= - 800 + 0.25Y and C = 800 + 0.75YO C. S= -800- 0.025Y and C = 800 – 0.075YO D. S= - 800 - 0.25Y and C=800 - 0.75YConsider the graph of these functions.The consumption function has a y-intercept ofand isThe saving function has a y-intercept ofand isThe consumption curve crosses the 45-degree line at a level of output of (Enter your response as an integer.)Click to select your answer(s).Casper

Saving function: S = a + bY When Y = 0, S = - 800 (vertical intercept = a), and MPS (b) = 0.25 S = -…

Derive the saving function and the consumption function. O A. S= - 800-0.25Y and C= 800 +0.75Y %3D O B. S= -800 + 0.25Y and C = 800 + 0.75Y %3D O C. S= - 800 - 0.025Y andC = 800 -0.075Y O D. S= - 800 - 0.25Y and C = 800 - 0.75Y Consider the graph of these functions. The consumption function has a y-intercept of and is The saving function has a y-intercept of and is The consumption curve crosses the 45-degree line at a level of output of (Enter your response as an integer.)

Derive the saving function and the consumption function. O A. S= - 800-0.25Y and C= 800 +0.75Y %3D O B. S= -800 + 0.25Y and C = 800 + 0.75Y %3D O C. S= - 800 - 0.025Y andC = 800 -0.075Y O D. S= - 800 - 0.25Y and C = 800 - 0.75Y Consider the graph of these functions. The consumption function has a y-intercept of and is The saving function has a y-intercept of and is The consumption curve crosses the 45-degree line at a level of output of (Enter your response as an integer.)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.3P

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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.
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?
9. Suppose Amal calculates her permanent income by adaptive expectations . Year 2020 Amal's permanent income was 38,000 , and year 2021 actual income is 41,000 . Assume that , long - run marginal to consume is 0.90 and short - run marginal propensity to consume is 0.28 . What is her consumption expenditure year 2021 ? O 36.774 O 35,040 O 40.226 O 33.454 O 34.740 O None of the above is correct
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Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.
Find the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is always $300, net exports (X-IM) are always - 550, government expenditures (G) and taxes (T) are each equal to $400, and the consumption function is described by the following algebraic equation: C = 150 + 0.75Dl DI is disposable income. How much saving (5) is there at the equilibrium level of income. Hint: (1) Dl = Y (national income or GDP) minus taxes (Y-T) (2) Income (Y) not consumed (C) must be saved (S). This means that S = Y-C. (3) to answer this you have to set Y=AE or Y=C+1+G (X-IM), and solve for Y. Then you have to solve for S.
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Suppose that the real interest rate is 6%. Next, assume that some factors changes, such that the expected rate of return, declines by two percentage points at each prospective level of investment. Assuming no change in the real interest rate, by how much and in what direction will the investment change? which of the following might cause this change: (a) a decision to increase inventories; (b) an increase in excess production capacity.
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)]
The saving function is given as:- S = -25 +0.25Y Calculate the equilibrium level of income in the economy if it is given that the planned investment is $200 million.
Assume that Andrew Marcus is 25 years old and expects to live until the age of 75. (a) If he wins €20 million in cash (after taxes) in the lottery and retires, how much will he consume each year if he wants to have constant consumption and use up all his wealth by the time he dies? Assume the real interest rate is zero. (75 words max) (b) If his total income in the year he wins the lottery is his lottery winnings, what will his average propensity to consume be for that year? (75 words max) (c) If he has no other earnings in later years but continues his constant consumption, what will his average propensity to consume be for those later years? (75 words max) (d) What is Andrew's "permanent income" in the year he wins the lottery? What is his "transitory income"? (75 words max)
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