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- Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. In this model, if lthere is an increse in both labor productivity and the marginal propensity to consume while autonomus expenditures remain unchanged, what will happen to the level of employment? a. can't say for sure b. decreses c. stays the same d. increasesUse the Keynesian cross to predict the impacton equilibrium GDP of the following. In eachcase, state the direction of the change and give aformula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both governmentpurchases and taxesDetermine aggregate expenditures (AE) in this economy when real GDP (Y) is equal to $1,500 billion, $2,000 billion, and $2,500 billion.When Y = $1,500 billion, AE = billion .When Y = $2,000 billion, AE = billion . When Y = $2,500 billion, AE = billion .
- Use two diagrams to explain the effects of the determinants of aggregatedemand on real GDP in a nation. ii. Suppose there is an expectation of a rapid general price increase in goodsand services in Australia in January 2021. Examine the effects of theanticipated general rapid increase in price for goods and services.A country’s GDP is defined by the following equation: GDP = Consumer Spending + Investmentspending. The economy of this country is closed and there’s no government. Investment spendingis defined by the following equation: Investment Spending = Investment (planned) + Investment(unplanned). Investment (planned) is fixed at 350. Consumer spending is defined by thefollowing equation: Consumer spending = 200 + 0.55 (GDP). And for this country, PlannedExpenditure = Consumer Spending + Investment Planned. Based on this information, attempt thefollowing questions:a. “Investment (unplanned) will be negative if GDP is 900” – showing work, test theauthenticity of this statement. b. How do you think GDP (and production) will change if the income of this country is 1500?Explain by deriving Investment (unplanned) for an income of 1500. c. Derive the GDP for which Planned Expenditure = GDP. d. Supposed Investment (planned) was increased to 450. How will income-expenditureequilibrium change. e. Relate…Use the Aggregate Supply and Aggregate Demand Model below to answer thequestions that follow Examine the influence of government expenditure on investment in a nation.Use Jot Inc. Ltd a multinational construction company in which you are theChief Exec of the firm that that is highly diversified and receives funds toconstruct highways and other government-funded projects. Also, explain thefactors that cause the Aggregate Demand curve to be downward sloping leftto right
- The first basic piece in the aggregate expenditures model is: O the expenditure schedule. O the demand schedule. O the supply schedule. O the consumption scheduleAssume taxes are zero and an economy has a consumption function of C = 0.89 (Yd) + $299.19. How much consumption takes place if disposable income is equal to 4,848.76? Round your answer to two digits after the decimal.The Simple Keynesian Model (i.e., the income-expenditure model). Assume: C = 150 + 0.9 DI I = 50 DI = C + I in equilibrium for a 2-sector model (Note: DI = C in a 1-sector model) Define the term, consumption. What is the value of “autonomous” consumption (also called “a” or the vertical intercept)? What is the value of the slope (also referred to as “b”) of the consumption function? There’s another name for the slope of the consumption function. What is it? What is the value of DI when the model is in equilibrium? What is the value of the “oversimplified” expenditure multiplier? If full-employment means that DI = $5000, then how much should autonomous consumption (or autonomous investment) increase to achieve full-employment? (Hint: Use the multiplier process formula.) Draw a graph of this 2-sector model. Indicate equilibrium DI, full-employment DI, as well as…
- Consider a national income model as: Y= C + I0 + G Y= National Income C= (Planned) Consumption Expenditure I0= Investment G= Government Expenditure Consider Y= 20trillion, G= 4.2trillion, I0= 3.8 trillion. Explain the key elements missing from the National Income model. Add a new endogenous variable to represent that missing element or endogenize one of the exogenous variables to address this issue. C= a+ b(Y-T0) (a>0, 0<b<1) G= gY (0<g<1)It is found that the consumption function for the economy is C = 50 + 0.8 Y d . Current level of output is 8800 and the potential GDP is 9000. Assuming the Keynesian view of the short run, answer the following questions. Illustrate this economy using a carefully labeled diagram. What is a larger concern for this economy: unemployment or inflation? If the economic policy makers want to bring the level of output to the potential GDP by changing the government expenditures (G), how much do they need to change G? Be sure to indicate whether the change is an increase or decrease. True or False and explain: If the policy in part c was successful, the unemployment rate will be zero.Assume that the Malaysian Prime Minister proposes to implement an economic recovery plan valued at RM300 million comprising of tax cuts and government transfer payments to households. If taxes fall by RM150 million and the spending on government transfer payments increases by RM150 million, which component ( transfer payments to households or tax cuts) of the recovery plan would have the larger effect on the equilibrium of aggregate expenditure, assuming other things are unchanged? a) Briefly state and evaluate the problem of time lags in enacting and applying fiscal policy i. How might expectations of a near-term policy reversal weaken fiscal policy based on changes in tax rates ii. In view of your answers, explain the following statement: “Although fiscal policy clearly is useful in combating the extremes of severe recession and demand-pull inflation, it is impossible to use fiscal policy to fine-tune the economy to the full-employment, noninflationary level of real GDP and…