Q: A 3-sector economic model was constructed and solved, and assuming the parameters take on certain…
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Q: State whether the statement is true or false The value of a average propensity to save can never be…
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A: Disposable income can be defined as the income available to the consumers after paying the taxes and…
Q: The value of multiplier depends on the _____
A: Multiplier refers to the magnitude by which the equilibrium output changes due to a change in…
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Q: What is the relationship between the marginal propensity to consume (mpc) and the multiplier?
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A: The over simplified formula of the multiplier is, Multiplier = 1 / (1-MPC) , where MPC is the…
Q: Calculate the value of MPC if the multiplier is given to be as 1.4
A: The value of multiplier is given as:- MULTIPLIER = 1 / Marginal propensity to save Also we know…
Q: Consider a hypothetical closed economy in which households spend $0.75 of each additional dollar…
A: Here MPC = 0.75 And MPS = 0.25 Multiplier = 1 / MPS = 4 Now, Increase in government spending = 250…
Q: If income is $1000 and consumption expenditure is $1200 then find the average propensity to save.
A: Given data: Income Y=$1000 Consumption C=$1200
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A: The consumption function : C = a + b(Y-T) Here a is the intercept that indicates the level of…
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Q: Suppose that the economy is characterized by the following behavioral equations! C = 180 + 0.80Y, /=…
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Q: Assume that that tax revenues (T) are proportional to income (Y). That means if the tax rate is…
A: Closed Economy: Y = C+I+G where C = a + b (Y – T) I = c – dr
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Q: If the ratio of MPS and MPC is 1:4 then find the value of multiplier.
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A: C=c0+c1Y This function shows the relationship between consumption and income level.
Q: How would an increase in taxes influence the size of a multiplier in a four factor model
A: The four factors of production in the economy are land, labor, capital, and organization and these…
Q: The multiplier effect demonstrates that:
A: Multiplier effect is one of the macroeconomic concept.
Q: If autonomous expenditure remains constant, and there is a decrease in the proportion of aggregate…
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Q: ind the value of multiplier when the value of MPS is 0.891
A: Initially in the question, We have to find the value of multiplier = ? MPS = 0.891
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Q: In the Build, Build, Build program of the government, describe how is a manufacturing firm…
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A:
Q: Define and Derive Multiplier and Accelerator.
A: In macroeconomics, the multiplier depicts an association between income and investment but the…
Q: Suppose that the economy is characterized by the following behavioral equations: C= 120 + 0.90Y, |=…
A: Gross domestic product (GDP): - GDP is the market value of all final goods and services produced in…
Q: Prove that the multiplier is equal to 1/(1-mpc)
A: We know Y = C + I and C = a + bY where Y is income C is consumption I is investment a is…
Q: Give an example of any factor that influence the size of the multiplier
A: Below is the formula for the Multiplier: Multiplier = 11 - MPCMPC = Marginal Propensity to Consume
Q: The assumption of the Baumol model implies that production in the public sector exhibits constant…
A: If one firm increases its labor productivity, perhaps through a technologicalinnovation, it is now…
Q: Assume that marginal propensity to consume is 0.75. autonomous consumption is 100 units (consumption…
A: Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.75) = 1/0.25 = 4
Q: Equity multiplier ratio : 2015: 1.66x 2016: 1.88x 2017: 1.94x 2018: 1.90x 2018: 1.74x What is the…
A: The Equity Multiplier is determined by dividing a company's net assets by its total equity. This…
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A: The multiplier effect shows the change in final income due to an injection of spending. For example,…
Q: Define the term multiplier effect (accelerator principle)?
A: There is some connection between the two. However, it is critical to recognise that they are…
Q: The multiplier in the Keysian model equals
A: The term multiplier is generally used more in economy to mean the effect on some endogenous variable…
Q: The value of marginal propensity to consume(MPC) is 0.61 Calculate the value of multiplier
A: Before preceding to the explanation and numerical part for our problem, let's first understand what…
Q: If the MPC is 0.67, then the oversimplified multiplier is
A: Multiplier can be find easily with the help of mpc.
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- n the Keynesian cross, assume that the consumption function is given byC = 200 + 0.75 (Y - T).Planned investment is 100; government purchasesand taxes are both 100.a. Graph planned expenditure as a function ofincome.b. What is the equilibrium level of income?c. If government purchases increase to 125, whatis the new equilibrium income?d. What level of government purchases is neededto achieve an income of 1,600?in a closed economy with no government, where aggregate demand is determinedby autonomous consumption, investment (which is independent of output), and themarginal propensity to consume.a) Given that autonomous consumption is 20, investment is also 20, and the marginalpropensity to consume is 0.6, write out an equation for aggregate demand (AD) in thiseconomy. b) Given this aggregate demand equation, and the equilibrium equation Y = AD, usealgebra to find the equilibrium level of Y. c) Draw a diagram with output (Y) on the x-axis and aggregate demand (AD) on the yaxis. Draw two lines on this diagram: (i) Y = AD, and (ii) the aggregate demandfunction from part (a). Label the intercept of the AD line, and the point where the twolines intersect, with numerical values. (3 marks)d) Suppose that the marginal propensity to consume falls from 0.6 to 0.5. What wouldthe new equilibrium level of Y be? Illustrate your answer in the diagram you drew forpart (c). (2 marks)e) Calculate the value of…We again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.
- Focus on the concept of marginal propensity to consume and reflect on which of the following would be implied by a highmarginal propensity to consume.O A small change in consumption when income changesO A high saving rateO A high marginal tax rateO An equilibrium level of income near full employmentO A low marginal propensity to saveSuppose that due ot a fiscal stimulus, there is an increase in disposable incomes of $100 billion in the first round. Then, $33 billion was spent in consumption from this initial change of the disposable incomes. Following the same marginal propensity to consume, how much is the change in consumption spending in the next round from the $33 billion?Suppose that the marginal propensity to consume is 0.75. If the government decreases spending by Ksh 500 billion, what is the change in output? If the government decreases taxes by Ksh 500 billion, what is the change in (ii) output? If the government decreases transfer payments by ksh 500 billion, what is the change in output If the government decreases spending by ksh 500 billion and at the same time decreases taxes by ksh 500 billion, what is the change in output?
- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. b. In what direction and by how much will it eventually shift?Consider first the goods market model with constant investment that we saw in Chapter 3. Consumption is given by C = c0 + c1(Y - T) and I, G, and T are given. a. Solve for equilibrium output. What is the value of the multiplier for a change in autoomous spending? b.Now let investment depend on both sales and the interest rate: I = b0 + b1Y - b2i Solve for equilibrium output using the methods learned in Chapter 3. At a given interest rate, why is the effect of a change in autonomous spending bigger than what it was in part a? In other words, why the multiplier is now bigger?In a keynesian model it is assumed that the consumption function is given by C= 2000 + 0.75 (Y-T) and the planned investment is 1,000 government purchases and taxes are both of those and formulate and draw a graph of planned expenditure as a function of income What is the equilibrium level in the part above If the government purchases increased by 1250 what is the equilibrium income With the aid of a algebra prove that a balanced budget multiplier is always equals to 1
- 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. 3. If government purchases increase to $150 million, what is the new equilibrium level of income? 4. What level of government purchases is needed to achieve an income of $2000 million? 5. From question e) you get the newly government purchase. Now find out the multiplier value 6. What is the amount of shift in AD curve? [Use the multiplier value from (5)]Suppose actual real GDP is $14 trillion and potential real GDP is $18.5trillion. If the marginal propensity to consume (MPC) is 0.85and government purchases increase by $526billion, then to close this gap lump-sum taxes should change by $_______billion. Please respond accurately and provide a detailed explanation with calculations; if not, I will downvote several times. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and planned government purchases = $4000. All planned expenditure are autonomous expenditures. Taxes ( T) is = zero, and net exports = zero. f) If at the current level of equilibrium, the economy is experiencing an inflationary gap $2000. How much is the full employment GDP? g) How much does planned investment change to close the inflationary gap? h) Graph the planned expenditure function. Show the change (shift) for a change in investment to close the gap. Show equilibrium points, full-employment GDP. Label all points clearly
