Question: Given the following model for an economy C = 100 + 0.8Yd G = 800 T = 500 %3D | = 200 a) Calculate the level of savings when the economy is in equilibrium. b) Find government spending multiplier. c) Find the new equilibrium level of output if investment is increased by 100 (AI = 100).
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A: MPC=0.75 MPS=1-0.75 =0.25
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- Based on the economic data of a country presented in the following table, complete the table! Question: a. Based on this information, complete the blank data. b. Determine what level of equilibrium income, consumption and savings are at equilibrium c. If there is an increase in government spending by 50 what is the new level of national income. d. how big is the multiplier in this model? What does it mean? e. Draw a graph of the balance of national income and its changesAn economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you expect the total change in Y* to be based on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) =Assume a closed economy in which disposable income starts at 1,000 and increases by 500; consumption starts at 1,100 and increases by 300; investment spending is 1,000 and government spending is 500. 1. The marginal propensity to consume (MPC) is equal to: 0.5 0.6 0.7 6 2. The multiplier is: 0.25 2 2.5 3 3.The consumption equation is: C = 500 + 0.6DI C = 500 + 0.5DI C = 100 + 0.75DI C = 100 + 0.6DI 4. Let ∆I = 1,000. What is the new equilibrium GDP" 7,000 7,500 2,000 8,500
- Question #4 - Use the aggregate expenditures model to demonstrate the multiplier effect.Suppose that an initial $ 10 billion increase in investment spending expands GDP by $ 10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $ 6 billion in the second round of the process. Instructions: In parts a and b, round your answers to 1 decimal place. In part c enter your answer as a whole number. A) What is the MPC in this economy? B) What is the size of the multiplier? C) If, instead, GDP and consumption both rose by $ 8 billion in the second round, what would have been the size of the multiplier?An economy has the following consumption function: C=$200+0.8DI . The government budget is balanced, with government purchases and taxes both fixed at $1,000. Net exports are $100. Investment is $600. 1. The value of equilibrium in this model is . 2. If government spending increases by $150, the equilibrium value increases by , demonstrating a multiplier value of . 3. If both G and T rise by $150 at the same time, the equilibrium Y will increase by
- Suppose that an initial $10 billion increase in investment spending expands GDP by $10 billion in the first round of the multiplier process. Also suppose that GDP and consumption both rise by $6 billion in the second round of the process. what is the MPC? What is the size of the Multiplier? If, instead, GDP and consumption both rose by $8 billion in the second round, what would have been the size of the multiplier?An economy is currently in equilibrium. The following figures refer to elements in its national income accounts. A) If national income now rises by £12 billion, and as a result, the consumption of domestically produced goods rises to £68 billion. Calculate the marginal propensity to consume (MPC). B) What is the value of the multiplier? C) Comment on the results in part (a) and (b).The following information is a three sector economy of a Consumption function (C) = 310 + 0.6Yd Investment multiplier (I) = 200 Government expenditure (G) = 170 Tax (T) = 180 iv. At the equilibrium level, compute the value of average propensity to consume (APC) v. If tax increase to RM200, derive consumption function after tax
- Use the graph to answer the questions that follow. a.What is the value of the MPC?b.What is the value of the MPS?c.What is the value of the multiplier?d.What is the amount of unplanned investment at aggregateoutput of 300, 900, and 1,300?Suppose disposable income increases by $2,000$2,000. As a result, consumption increases by $1,500$1,500. Answer the questions based on this information. Where appropriate, enter your answer as a decimal rather than as a percentage. 1) The increase in savings resulting directly from this change in income is 2)The marginal propensity to save (MPS) is 3)The marginal propensity to consume (MPC) isA government announces a green budget where they will provide zero interest loans for private sector investment in green electricity production, spend on government investment in rail transport and increase value added tax on all consumer goods with a high carbon footprint. Use the multiplier model (diagram and equations) to explain the likely effect on aggregate demand in the economy. Assume ceteris paribus. In your answer explain how you are interpreting ‘ceteris. paribus.’ when discussing the predictions of the multiplier model.