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- For a closed economy, GDP is $10, consumption is $8, taxes are $1, and the buget deficit is $1, What are private saving and national saving? a. $2 and $1 O b. $1 and $2 O c. $1 and $0 O d. $1 and $1The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, no government transfer payments, taxes of $150 million merits, a budget surplusof $40 million merits, and investment of $100 million merits. What was its consumption and government expenditures on goods and services? Please show you calculation1. When calculating gross national disposable income in an open economy, we adjust gross nationalexpenditure by:a. subtracting exports and adding back imports.b. adding in net income earned from foreign sources, plus the trade balance, plus net unilateraltransfers from abroad.c. subtracting depreciation, payroll taxes, and indirect business taxes, while adding in subsidies.d. taking out net factor income from abroad and subtracting net unilateral transfers.
- Write out the equation for desired national savings. What changesto desired national saving and desired national consumption happen whengovernment spending increases, funded by an increase in taxes? Why doesconsumption change by less than G?ADVANCED ANALYSIS Assume that the consumption schedule for a mixed open economy is such that consumption is: C = 250 + 0.8Yd Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 50 and Xn = 30. Lastly, assume government spending G = 40 and taxes T = 40. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + G + Xn Given that taxes T are present, the consumption schedule can be rewritten as: C = 250 + 0.8(Y - T) Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Xn changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $11 trillion Saving (= Investment): $3 trillion GDP: $14 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? billion b. by how much must consumption decline? billion
- 3. Consider the following information on a 4-sector (“private-public-open”) economy, where Y stands for the GDP and Ca, Ig, and Xn are respectively consumption after tax, autonomous investment and next exports. Ca = 40 + 0.80 (Y-T) Ig = 30 Xn= 10 T=20 G=20 DI-Y-T Use the information above to solve for equilibrium value of GDP (Y), DI, Ca, Sa, and APC, and APS. Show all your calculations. Show the 4-sector equilibrium GDP graphically. What is autonomous consumption, MPC, MPS, and the multipliers for G and T in this economy? If GDP =520, what would be AEa? Will there be unplanned inventory investment or disinvestment? Will GDP increase or decrease? Why? Explain. At GDP=520, what would be planned investment? actual investment?What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y ) is equal to aggregate expenditures: Y = C + Ig + Xn.a. Calculate the equilibrium level of income or real GDP for this economy.b. What happens to equilibrium Y if Ig changes to 10? What does this outcome reveal about the size of the multiplier?
- If a country is running a government budget surplus, why is (T - G) on the left side of the saving-investment identity?Imagine that the U.S. economy finds itself in the followingsituation:agovernmentbudgetdeficitof$100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion.Accordingtothenationalsavingandinvestment identity,whatwillbethecurrentaccountbalance?What willbethecurrentaccountbalanceifinvestmentrisesby $50billion,whilethebudgetdeficitandnationalsavings remain the same?Real Interest A Ra te World interest rate, fo Real Exchange Ra te Ex E Ę₂ Supply of Loare ble Funds Derrand for Loa rable Funds Quantity of Loanable Funds Supply of Canadian Dollars (5-1) D₁ Do Quantity of Dollars Refer to the Figure 13-2. Suppose that these diagrams refer to Canada. If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada, what would happen to the interest rate? a. It would stay at r0. O b. It would decrease because supply would shift right. OC. It would increase because supply would shift left. O d. It would decrease because demand would shift left. 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.
