For an economy where: C = 75 + 0.7Y I= 125 a) Solve for Y". Include your calculations. b) Draw the AE-Y graph for the economy. Include the intercept and slope of the AE function.
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- 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.Assume that consumption decreases, when interest rates increase. If there is a technological advance that leads to an increase in investment demand, then: A. investment increases and the interest rate rises. B. investment and the interest rate are both unchanged. C. investment is unchanged and the interest rate rises. D. investment decreases and the interest rate rises.What is the Euler equation for consumption and what is What is the Euler equation for consumption, and what is its economic interpretation? What is the Euler equation for consumption and what is
- Give me correct and incorrect answer with explanation The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant? options: point A point B point C point D Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.What is the Euler equation for consumption, and what is its economicinterpretation?Q20 Suppose investment spending is NOT very sensitive to the interest rate. Given this information, we know that: Select one: a. the IS curve should be relatively flat. b. the IS curve should be relatively steep. c. the LM curve should be relatively steep. d. the LM curve should be relatively flat.
- It is possible that the interest rate might affect consumption spending. An increase in the interest rate could, in principle, lead to increases in saving and therefore a reduction in consumption, given the level of income. Suppose that consumption is, in fact, reduced by an increase in the interest rate. How will the IS curve be affected?Suppose that the government creates a disincentive for private saving by increasing the tax that people pay on income from holding stocks and bonds. Construct a well-labeled diagram that depicts the effect of the policy change on the real interest rate and the equilibrium quantity of investment.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.
- The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant? options: point A point B point C point DOn the following graph, use the blue curve to plot investment as a function of disposable income: According to the table, investment is: a. Autonomous with respect to disposable income b. Responsive to changes in interest rates c. Responsive to changes in business expectations d. Correlated with consumption A terrorist attack that makes business forecasts more pessimistic would cause the investment function you drew previously to a. Slope upward b. Shift up c. Shift down d. Slope downwardEconomists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The economists also estimate that the investment function is: I = 3,300 – 100 r, where r is the country’s real interest rate, expressed as a percentage. Calculate private saving?
