If government spending as a percent of potential GDP had just risen from 18% to 20%, what does the spending allocation model predict would be happening in our economy to consumption, investment, and net exports? Sketch out the spending allocation diagram and show any changes that might have occurred.
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- Imagine that the U.S. economy finds itself in the followingsituation:agovernmentbudgetdeficitof$100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion.Accordingtothenationalsavingandinvestment identity,whatwillbethecurrentaccountbalance?What willbethecurrentaccountbalanceifinvestmentrisesby $50billion,whilethebudgetdeficitandnationalsavings remain the same?Suppose that for a particular economy, for some time period, consumption was given by theconsumption function C = 300 + 0.9YD, investment was equal to 200, government expenditure wasequal to 100, net taxes were fixed at 100, exports were equal to 200, and imports were given by theimports function Z = 10 + 0.1YD. Note that YD represents disposable income. a.Suppose households earn $150 more in their disposable income. How much more would theyconsume in total? How much go to domestic goods and how much go to imported goods? Howmuch would they end up saving? b.What is the level of equilibrium income? What about the level of consumption and import? c.What are the values of the government spending multiplier, tax multiplier and balanced-budgetmultiplier? d.Suppose the investment level suddenly declined by 20. How should the government stabilize theeconomy? Please provide all options in detailTRUE/FALSE When we add the marginal propensity to import to our model, the spending multiplier falls. In fact, the higher the marginal propensity to import, the smaller the spending multiplier, all else constant.
- What is the relative importance of consumption spending (C) in aggreagte demand and some factors that affect it? What is the relative importance of investment spending (I) in aggreagte demand and some factors that affect it? What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it? What is the relative importance of Net Export (NX) (Net Export = spending on exports (X) - imports (M)) in aggreagte demand and some factors that affect it?i need this in word not handwritten Q7. Assume that in 2015, the following prevails in the Republic of Nurd: Y = $200 G = $0 C = $160 T = $0 S = $40 I (planned) = $30 Assume that households consume 80 percent of their in- come, they save 20 percent of their income, MPC = 0.8, and MPS = 0.2. That is, C = 0.8Yd and S = 0.2Yd. Is the economy of Nurd in equilibrium? What is Nurd’s equilibrium level of income? What is likely to happen in the coming months if the government takes no action? 2. If $200 is the “full-employment” level of Y, what fiscal policy might the government follow if its goal is full employment? 3. If the full-employment level of Y is $250, what fiscal policy might the government follow? 4. Suppose Y = $200, C = $160, S = $40, and I = $40. Is Nurd’s economy in equilibrium? 5. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxation and continues to spend $30 every period. If I remains constant, what…What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…
- Consider a hypothetical economy where there are no taxes and no international trade. Households spend $0.60 of each additional dollar they earn and save the remaining $0.40. If there are no taxes and no international trade, the oversimplified multiplier for this economy is __________. Suppose investment spending in this economy increases by $250 billion. The increase in investment will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in investment spending on the first two rounds of consumption spending and, eventually, on total output and income. Now consider a more realistic case. Specifically, assume that the government in our hypothetical economy collects income taxes. In this case, the multiplier will be ______ (options: the same as, smaller than, larger than) the oversimplified multiplier you found earlier. Suppose that the price level in our…Consider a hypothetical economy where there are no taxes and no international trade. Households spend $0.60 of each additional dollar they earn and save the remaining $0.40. If there are no taxes and no international trade, the oversimplified multiplier for this economy is 2.5. I need help with the part in bold. Suppose investment spending in this economy increases by $250 billion. The increase in investment will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in investment spending on the first two rounds of consumption spending and, eventually, on total output and income. Now consider a more realistic case. Specifically, assume that the government in our hypothetical economy collects income taxes. In this case, the multiplier will be ______ (options: the same as, smaller than, larger than) the oversimplified multiplier you found earlier. Suppose that…In an economy, consumers spend 800 million regardless of their level of disposable income. In addition, they spend 75% of their yearly disposable income. * Investment is fixed at 250 million, Gvt expenditures are 120 million, net taxes are 100 million, exports are 170 million. Imports are 15% of the level of disposable income. Q, what is this economies equilibrium level of output Q how much would net export be when this economy is at equilibrium output
- Suppose we are in an economy with rich households and poor households. Rich and poor households have different consumption functions, with Cpoor = 100 + 35(Y poor − Tpoor) Crich = 100 + 15(Y rich − Trich) where Y rich, Y poor are the incomes of rich and poor households and T rich, T poor are the taxes faced by rich and poor households. We also have I = 200,G = 100, T = T poor + T rich = 100. Closing out the model, Y = C + I + G = Cpoor + Crich + I + G a Suppose that Y poor = Y rich Y2 (in other words, the total income of poor households is equal to total income of rich households.) Supposing further that T rich = T poor = 50, calculate equilibrium output Y . b Now suppose that Trich = 40,Tpoor = 60. What is equilibrium output now? c How can the government increase output without changing the deficit (hint: think about the difference between output in b and output in c.) d Now assume that T rich = 40, T poor = 60, but instead of output being split equally between rich and poor…Only typed answer Given the following for the economy of a country: Consumption function: C=90+0.75Yd. Investment function: I=75. Government spending: G=100. Net export: NX=50. Net taxes: T=50. Disposable income: YdY-T. Equilibrium: Y=C+I+G+NX. a. Solve for equilibrium income. Show your work below. b. If autonomous investment decreases by 60, what is the new level of income? Show your answer on the same graph. Show your work below. c. What is the value of the spending multiplier? Show your work below.For the first three questions, please consider a closed economy with the following information (and no transfer payments): Government purchases = $30,000Output (income) = $300,000Taxes = $20,000Total savings = $100,000Calculate this economy's public savings. Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary.