MACROECONOMICS W/CONNECT
18th Edition
ISBN: 9781307253092
Author: McConnell
Publisher: Mcgraw-Hill/Create
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Chapter 11, Problem 2P
To determine
Savings and Investment.
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5. Consider the following is the economy of Country Z:
C = 200 + 0.85Y
I = 100
Answer the following questions:
(a) Calculate the equilibrium level of output algebraically using the
saving-investment (S-I) approach.
(b) What is the value of saving at the equilibrium output from part (a)?
(c) Suppose the investment increases to 200. What is the new equilibrium level of
output? Calculate the value using the multiplier approach.
5. Consider the following is the economy of Country Z:
C = 200 + 0.85Y
I= 100
Answer the following questions:
(a) Calculate the equilibrium level of output algebraically using the
saving-investment (S-I) approach.
(b) What is the value of saving at the equilibrium output from part (a)?
(c) Suppose the investment increases to 200. What is the new equilibrium level ot
output? Calculate the value using the multiplier approach.
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?
Chapter 11 Solutions
MACROECONOMICS W/CONNECT
Ch. 11.2 - Prob. 1QQCh. 11.2 - Prob. 2QQCh. 11.2 - Prob. 3QQCh. 11.2 - Prob. 4QQCh. 11.7 - Prob. 1QQCh. 11.7 - Prob. 2QQCh. 11.7 - Prob. 3QQCh. 11.7 - Prob. 4QQCh. 11 - Prob. 1DQCh. 11 - Prob. 2DQ
Ch. 11 - Prob. 3DQCh. 11 - Prob. 4DQCh. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Prob. 8DQCh. 11 - Prob. 1RQCh. 11 - Prob. 2RQCh. 11 - Prob. 3RQCh. 11 - Prob. 4RQCh. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10P
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- ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C=100+ 0.8Y. Assume further that planned investment lg, government spending G, and net exports Xn are independent of the level of real GDP and constant at /g=60, G= 0, and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C+ Ig+G+X Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Y if lg changes to 40? $ What does this outcome reveal about the size of the multiplier? Multiplier =arrow_forwardADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 100 + 0.75 Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and = 60, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: constant at Y= C+ lg+ G+ Xn: Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Yif lg changes to 40? What does this outcome reveal about the size of the multiplier? Multiplier =arrow_forwardA reduction in the marginal propensity to import will cause A) the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output. B) the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output. C) the multiplier to decrease and a given change in government spending (G) to have a larger effect on domestic output. D) the multiplier to decrease and a given change in government spending (G) to have a smaller effect on domestic output.arrow_forward
- ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 100 + 0.9 Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 60, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y= C+ lg+ G+ Xn. Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Yif lg changes to 40? 2$ What does this outcome reveal about the size of the multiplier? Multiplier =arrow_forwardAssume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,00%3; national saving = $12,000. (Please write the calculation details) %3D %3D %3D (1) For this economy, what does investment amount to (2) For this economy, what do government purchases amount to? (3) For this economy, what do taxes amount to? (4) Is this economy's government budget surplus or budget defcit? How much it is?arrow_forwardThe data in columns 1 and 2 in the table below are for a private closed economy. (1) Real Domestic Output (GDP - DI), Billions (2) Aggregate Expenditures, Private Closed Economy, Billions (5) Net Exports, Billions (6) Aggregate Expenditures, Private Open Economy, Billions (3) Exports, Billions (4) Imports, Billions $300 $340 $30 $20 350 380 30 20 400 420 30 20 450 460 30 20 500 500 30 20 550 540 30 20 600 580 30 20 650 620 30 20 a. Use columns 1 and 2 to determine the equilibrium GDP for this hypothetical economy. billion b. Now open up this economy to international trade by including the export and import figures of columns 3 and 4. Fill in the gray-shaded cells in columns 5 and 6. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. What is the equilibrium GDP for the open economy? billion What is the change in equilibrium GDP caused by the addition of net exports? billion c.…arrow_forward
- Consider the following information on aggregate income, consumption expenditure, and planned investment for a country: Aggregate Output/Income $3,950 4,150 Planned Consumption Investment $3,610 3,770 3,930 4,090 4,250 4,410 4,570 4,730 $500 500 4,350 4,550 4,750 4,950 500 500 500 500 5.150 500 5,350 500 When aggregate income is $4,350, O A. saving is $420 and unplanned investment (inventory change) is - $80. B. saving is $40 and unplanned investment (inventory change) is - $80. OC. saving is - $420 and unplanned investment (inventory change) is $500. O D. saving is - $80 and unplanned investment (inventory change) is $500. The equilibrium level of output/income is S (Enter your response as an integer.) Based on the information above, calculate the MPC and MPS. MPC =|. (Round your response to two decimal places.) MPS = (Round your response to two decimal places.)arrow_forwardADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy? Equilibrium GDP (Y) = $ . b. What happens to equilibrium Y if Ig changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .arrow_forward8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C = 15+0.75 x (Y-T) Suppose G = $90 billion, 1 = $60 billion, and T = $20 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y=C+I+G, the equilibrium output level is equal to 5 billion. Suppose the government purchases are increased by $50 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal toarrow_forward
- HELP ME PLEASE 20 MINS LEFT!!! A- if this economy was an open economy without a government sector, what would be the level of gdp and aggregate expenditure? B- If the economy becomes an open economy without a government sector, what would he the level of gdp and aggregate expenditure? C- Calculate the size of the multiplier associated with changes in government spending D- What is the effect if adding the government sector to the economy on the GDP and the AE? Show your calculationsarrow_forwardThe rate of output and planned expenditures for the economy of Timbuktu are shown in the following table: Total Output Planned Aggregate Expenditures (Two-Sector Economy) (Real GDP in billion dollars) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000 6,250 c) What is the equilibrium rate of income/output of Timbuktu economy? d) If the economy's full employment rate of output is $6.0 trillion, what will happen to the unemployment rate assuming that it will persist into the future? e) What would happen to the equilibrium level of output/income if there will be an autonomous increase in investment of $250 billion?arrow_forward5. Saving and net flows of capital and goods In a closed economy, saving and investment must be equal, but this is not the case in an open economy. In the following problem, you will explore how saving and investment are connected to the international flow of capital and goods in an economy. Before delving into the relationship between these various components of an economy, you will be asked to recall some relationships between aggregate variables that will be useful in your analysis. Recall the components that make up GDP. National income (Y) equals total expenditure on the economy's output of goods and services. Thus, where C = consumption, I = investment, G = government purchases, X = exports, M = imports, and NX = net exports: Y = Also, national saving is the income of the nation that is left after paying for Therefore, national saving (S) is defined as: S = Rearranging the previous equation and solving for Y yields Y = Plugging this into the original equation showing the various…arrow_forward
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