Using the data below show the five basic methods to derive equilibrium income & the value of the multiplier with the following parameters: a. A Private Closed Economy b. A Private Open Economy e. A Mixed Open Economy (with lump sum taxes only) d. A Mixed Open Economy C=a+bY a- 900 C,a+ by, b 0.6 1@r T-20, G 20, t 0.05 G & T +tY m0.2 X=X I- 100 M-M my 60 M 40

Using the data below show the five basic methods to derive equilibrium income & the value of the multiplier with the following parameters: a. A Private Closed Economy b. A Private Open Economy e. A Mixed Open Economy (with lump sum taxes only) d. A Mixed Open Economy C=a+bY a- 900 C,a+ by, b 0.6 1@r T-20, G 20, t 0.05 G & T +tY m0.2 X=X I- 100 M-M my 60 M 40

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

See similar textbooks

Similar questions

Assume an economy in which:(i) there are no exports and no imports,(ii) investors always want to spend $200 billion, or I = 200,(iii) government spends $500 billion and tax revenue is $200 billion,(iv) consumption is a linear function of disposable income, C=100+0.8Yd Assume that the government eliminates taxes while keeping governmentspending the same. (Thus T = 0 and G = 500.) The economy’s consumption function andinvestment remain unchanged. What is the new equilibrium level of national income?
Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and generates $2200 output and income in equilibrium. Suppose also that the government collects a lump-sum tax of 300. How much will the private sector be saving total in equilibrium? (round your answer to the nearest whole value)
If the MPC equals 0.5, and real GDP is $14 trillion with potential real GDP $14.5 trillion, how much would governmentpurchases would need to increase by to restore the economy to potential real GDP?
Assume a closed economy with no government and a fixed aggregate price level and constant interest rate. Furthermore, assume that the country's consumption function is C = 200 + 0.75YD, where YD is disposable income, and C is consumption, and that planned investment is $75. What will happen if aggregate wealth decreases by $100, all else equal? a. The aggregate spending line will shift downward. b. The income–expenditure equilibrium real GDP will increase by more than $100. c. There will be no multiplier effect on real GDP, since there is a drop in aggregate wealth. d. Planned investment will increase.
TRUE/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.
a. Suppose that in an economy with no government, the aggregate expenditurefunction is: AE = 50+0.75Y with an investment level of 100.i. Determine the level of planned expenditure when income is 150.ii. Draw a diagram showing the aggregate expenditure functioniii. What are the levels of autonomous consumption and inducedconsumption at income levels of 150 and 200.b. An open economy with a government sector is in equilibrium. Assume thefollowing:1. Marginal propensity to save = 0.42. Marginal propensity to tax = 0.23. Marginal propensity to import = 0.2i. Solve for the value the government multiplier ii. Determine by how much the equilibrium level of national incomewould fall, if injections in the economy are reduced by Ks.60m.iii. Determine the new level of income if taxes increased by KS. 20c. Propose four reasons why economists should not consider GDP an effectivemeasure of the standard of living in a country.
The table below provides income and consumption data in billions of dollars: Disposable Income Consumption Savings 100 80 --- 200 150 --- What is the marginal propensity to save for this economy? A) 0.75 B) 0.5 C) 0.3 D) Cannot be determined
Assume an economy in which:(i) there are no exports and no imports,(ii) investors always want to spend $200 billion, or I = 200,(iii) government spends $500 billion and tax revenue is $200 billion,(iv) consumption is a linear function of disposable income, C=100+0.8YdAnswer the following questions:a. What is the marginal propensity to save (MPS)?b. What is the saving equation?c. What is the equilibrium level of national output/income (Y)?d. At the equilibrium income level (Y*, your answer to c) calculate private saving,and explain the relationship between private saving and planned investment?
PLEASE ONLY ANSWER QUESTION FOUR (i am giving you the others as context) (i need this by 11:55pm tonight, so in like 25 minutes, so please hurry!!) ANSWER THIS ONE: 4. Based on the answer to the previous question (question #3), if half of those government expenditures are financed through lump sum taxes, calculate the new level if NI? (C+I+G) HERE ARE THE FIRST THREE QUESTIONS AS CONTEXT: 1. Calculate the MPC in the above diagram. 2. Based on Diagram 1, If private Investment of $100 is added to the existing C, calculate the new equilibrium level of NI. 3. Given your answer to the previous question (question #2) calculate by how much G should change, if the full employment level in the economy is at $3000.
V1 Consider the following information for a country: Consumption function: C = 85+0.8Yd Investment function: l = 85 Government spending: G=60 Net taxes: T = -40+0.25Y Disposable Income: Yd = Y - T Equilibrium: Y = C + l + G The level of equilibrium income, Y, = $_____(Enter response rounded two decimal places) The government collects net taxes of $_____ Remember the budget surplus is equal to taxes minus government spending, The governments budget surplus is $____
Assume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by the equationC = 1,200 + 0.6(Y −T)−100r, where r is the real interest rate, in percent. Investment (I) is givenby the equation I = 2,000 − 200r. Taxes (T) are 1,000, and government spending (G) is 1,500.(a) What are the equilibrium values of C, I, and r? (b) What are the values of private saving, public saving, and national saving? (c) For the given consumption function, what does the relationship between consumption and theinterest rate imply about the saving schedule?
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.