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please explain each question.
1. We assumeconstantMPC in our model. Is this assumption true in the real world?
2. What determines the proportion of bonds/money that the household keeps?
3. What effect an increase of government spending will have on the output equilibrium in the goods market? Explain using autonomous spending.
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- 1. What is meant by "autonomous consumption"? 2. Explain the consumption puzzle?3) In the macroeconomic model below, Y is aggregate output, C is aggregate consump- tion, Io is aggregate investment, Go is government spending, T is the total amount of taxes collected by the government, and t is income tax rate. The variables Y, C, and I are endogenous, Go, Io, and t are exogenous, and a, b, and k are parameters. Y=C+ Io + Go C=a+b(Y-T) T=k+tY (a > 0,6€ (0,1)) (k>0, t€ (0,1)) Calculate the determinant of the coefficient matrix A associated with this system of equations. The determinant of the coefficient matrix A is: 1-b.+ bt a) A b) A-1-b-bt + a c) |A|=b+t d) A1+a+b-t e) |A| =Go+b+t f) A-Io-b+t 8) A = Go + Io +b-t3) In the macroeconomic model below, Y is aggregate output, C is aggregate consump- tion, Io is aggregate investment, Go is government spending, T is the total amount of taxes collected by the government, and t is income tax rate. The variables Y, C, and I are endogenous, Go, Io, and t are exogenous, and a, b, and k are parameters. Y = C + Io + Go C = a + b(YT) T=k+tY (a > 0, b = (0, 1)) (k > 0, t = (0, 1)) Calculate the determinant of the coefficient matrix A associated with this system of equations. The determinant of the coefficient matrix A is: a) |A| = 1-b+ bt b) |A| = 1-b-bt + a c) |A| = b + t d) |A| = 1+ a + b - t e) |A| = Go +b+t f) A = Iob+t g) A = Go + Io +b-t
- c. What is meant by "autonomous consumption"? d. Explain the consumption puzzle? e. How does the Life-Cycle Hypothesis resolve the puzzle?This question is based on the following information regarding a goods market model: Autonomous consumption = R450 million Government spending = R300 million Taxes = R200 million Marginal propensity to consume = 34 At an equilibrium income level of R2 400 million, the consumption spending is equal to ... Select one: A. R2 100 million B. R1 650 million C. R2 250 million D. R2 550 millionWhat is the multiplier effect in economics? A. The tendency of consumers to save rather than spend B. The tendency of firms to reduce production during a recession C. The amplification of changes in spending through the economy D. The reduction of government spending to control inflation
- Which of the following statements best describes the multiplier effect in economics? A. The process of reducing government spending to stimulate economic growth. B. An increase in consumer saving when government expenditure decreases. c. A phenomenon where an initial increase in spending leads to a more significant overall increase in economic output. D. The concept of a fixed relationship between inflation and unemployment rates.What effect an increase of government spending will have on the output equilibrium in the goods market? Explain using autonomous spending. please explainBased on the economic data of a country presented in the following table, complete the table! Question: a. Based on this information, complete the blank data. b. Determine what level of equilibrium income, consumption and savings are at equilibrium c. If there is an increase in government spending by 50 what is the new level of national income. d. how big is the multiplier in this model? What does it mean? e. Draw a graph of the balance of national income and its changes
- 1. In the Keynesian model, suppose that the economy has the following values : C = 100 + 0.75*Y G = 300 I = 200 NX = 0 (remember Y = GDP = C + I + G + NX) a) Solve for the level of equilibrium output in this economy. b) What is the MPC in this economy? What is the multiplier on government spending? (I want a specific number here, not a definition) c) Household savings is defined as income minus consumption (S = Y – C). What is the level of household savings in this economy? d) Suppose that households become nervous about the future of the economy and decide that they will consume less and save more money, so their new consumption function becomes C = 100 + 0.6*Y Solve for the new equilibrium level of output and calculate how much households end up saving. How has it changed from the level of savings in part c? e) How much does the government needs to increase its spending by to counteract the fall in economic output in this model?Study the graph below. When will the multiplier be biggest? Price Level AD1 AS AD3 AD2 GDP Select one: a. When aggregate demand is at AD3 b. When aggregate demand is at AD2 c. When aggregate demand is at AD1 d. The multiplier will be the same size no matter what Aggregate Demand is ○ e. The multiplier will be one no matter what aggregate demand isHow do consumption and investment spending affect aggregate expenditures and output over the business cycle? Which is more responsible for volatility - consumption or investment spending or both? Explain your choice. How do government actions affect consumption and investment?