The model of national economy is characterised by the following data: Household consumption C-400+0.9 DI Gross investment Ig 200 Government spending G-250 Sum of Taxes T 150 Disposable income DI = Y-T Calculate: a) Equilibrium level of income Y; b) Calculate the value of Marginal propensity to consume and value of Marginal propensity to save; c) Private consumption at macroeconomic equilibrium;
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- The national income model for an economy is represented as follows (units are in Ksh.M) Y = C + I + G + X – M I = 320 + 0.20Y G = 980 C = 540 + 0.80Y M = 640 + 0.25Y X = 850 Y = National income; C = Consumption; I = Investment; G = government spending; X = Exports; and M = Imports. Determine the following.TRUE or FALSE: This model has three endogenous variablesAnswer 1Choose... TRUE or FALSE: The country’s marginal propensity to save is 20%.Answer 2Choose... Autonomous level of importsAnswer 3Choose... Equilibrium investment Answer 4Choose... Equilibrium national incomeAnswer 5Choose... Net Exports (NX) Answer 6Choose... TRUE or FALSE: The economy is a net importerDescribe how the endogeneity versus exogeneity of consumption expenditures (i.e., the household sector) affects the size of predicted output multipliers by an input-output model.. Consider the macroeconomic model of a two-sector economy (i.e. no government or trade) using standard notation. Assume that the consumption function is linear, i.e. of the form: C = a +bY . It is known that when ? = 110, the value of consumption, C , is equal to 160.8, and that when ? = 170, the value of C is 207.6. (a) Determine the consumption function and derive the savings ( S ) function for the model. What is the marginal propensity to consume? (b) Determine the equilibrium level of national income when planned investment ? = 255.
- QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = C0 + YD (aggregate household consumption)YD = Y − T (aggregate household disposable income)Ip = I0 + aY − bR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T – G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)C0) and I0 autonomous consumption and investment0 < a, c, a+c < 1, b > 0 constant parametersDerive the equation for output and answer the following question. If the government in this model simultaneously increases its consumption G and its taxes T by the same amount, then: total demand decreases, and equilibrium output declines. total demand decreases, and equilibrium output declines, but only if C > G. total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households’ marginal propensity to consume. total demand…Consider the following model of an economy operating with fixed wages, prices and interest rates and hasexcess capacity. Adsume all figures are I Zambian kwacha. C=100+0.8yd, T=100+25Y, G=980 and I= 500 Where c is consumption, yd is disposable income, T is taxes net of transformers, G is government spending on goods and services and I is investments. A. Calculate the equilibrium level of national income B. Illustrate your equilibrium in the keyneasian cross diagran C. What is the value of the multiplier D. Is governnent running a surplus or a deficit E. Show the impact of a reduction in government spending by 80 on the equilibrium level of national income F. Illustrate your new equilibrium in the same Keynesian cross diagram as in b.Let the national income model be; Y = C + I0 + G , C = a + b ( Y – T) , G = g Y Identify endogenous variables Find the equilibrium national income Find equilibrium consumption(using static equilibrium & matrix algebra both
- Consider a basic goods market model where the propensity to consume is 60% of disposable income. If the government wants to increase output Y by 10%, public spending should beScegli un'alternativa: I do not answer increased by 2,5% of Y increased by 4% of Y increased by 10% of Y increased by 40% of YQuestion 1: In the case of a 2 sector economy model, when the income increases from RM 400 mil to RM 450 million, consumption increases from 200 million to 230 million. The autonomous investment is RM100 million. Assume autonomous consumption is 1.1) Calculate the value of MPC 1.2) Calculate the value of MPS 1.3) Derive consumption function, if the autonomous consumption is RM100 million 1.4) Construct saving function, if the autonomous saving is RM100 million Question 2: Given the following information C=200 + 0.75Y I=100 G=50 T=100 X=100 M=50 Find the equilibrium income by using the formula of Y = C + I + G + (X – M) Question 3: The following information is about monetary items for the country. ITEMS RM(Million) Paper money 5500 Negotiable certificate of deposit 3600 Fixed & savings deposits in other banking institutions 7900 Fixed & savings deposits in commercial banks 15000 Demand deposits 9000 Bank Negara Certificates 12000…Suppose Bank of England is considering using the tool of cutting interest rates to boost household consumption. In this question you will be asked to use the intertemporal choice model to assess the impact of different policies on household consumption. Suppose a consumer's current income is £25,000 and their future income is £30,000, and they initially face a market interest rate of 15% on both saving and borrowing. (a) In a diagram with consumption this year (C1) on the horizontal axis and consumption next year (C2) on the vertical axis, illustrate this consumer's budget constraint (using the numerical values set above) and indicate their optimal choice by drawing a indifference curve convex to the origin, assuming that at the current interest rate it is optimal for them to save. (b) Calculate (using the numerical values set above) and interpret their marginal rate of time preference at their optimal choice. (c) Illustrate and explain how a fall in the market interest rate from 15%…
- The average propensity to consume refers to the Group of answer choices percentage of income spent for current consumption expenditures for the minimum necessities of life percentage of income saved dollars of income spent for current consumption fact that people with higher incomes spend more for the necessities of lifeProblem 1. Ramsey (a) Rewrite and explain the main equilibrium equations of the Ramsey model assuming the government provides a uniform public good G(t) and finances this expenditure via lumpsum taxes. (b) Analyse the effects on the steady-state and the transition path of a permanent increase government spending; (c) Analyse the effects on the steady-state and the transition path of a temporary increase government spending; (d) Assume now that the government decides to finance public expenditure by taxing investment income at rate τ k . Thus the real interest rate that the households face is now given by r(t) = 1 − τ k f 0 (k (t)) and the government budget constraint is τ kf 0 (k (t)) k = G(t). Repeat the analysis in points [(a)], [(b)] and [(c)].No written by hand solution Suppose an imaginary closed economy is characterized by the following: C = c0 + c1 (Y − T) T = t0 + t1Y I = 300 G = 300 C is consumption, Y and YD are, respectively, income and disposable income, T is the level of taxes, and I and G, are, respectively, private investment, and government spending. c0 and c1 are, respectively, autonomous consumption and the marginal propensity to consume; their values are unknown. However, the expression for private saving, S, is as specified below, where s1 is the marginal propensity to save out of total income. S = 0.4Y − 500 Assuming that the marginal tax rate, t1, is equal to 0.1 and the equilibrium GDP is 2000, find the level of autonomous taxes, t0, the equilibrium values of consumption, disposable income, and private saving.
