.Consider the economy is characterised by the following equations: C = co + C1YD T = to + tY t1 E (0,1) YD = Y –T G and I are both constant. (a) Find the multiplier. (b) Does the economy respond more to changes in autonomous consumption (co), when t, is zero or positive? Explain your answer. (c) Now assume that taxes are lump sum (constant, i.e., T = T), but investment increases with output through the equation I = bo + b¡Y, what is the new multiplier?
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- Consider an economy that is characterised by the following set of equations: C = co + C1YD Yp Y - T I bo + bịY %3D Government spending (G) and taxes (T) are constant. Note that investment () is proportional to output (Y). a) Solve for equilibrium output. b) Using your answer derived in (a) identify and discuss the multiplier. How does the relation between investment and output affect the value of the multiplier?Assume that a nation's marginal propensity to consume (MPC) is 0.75. A highiy productive, cost-cutting technology is developed for the production of commercial airplanes. The total industry expenditure in this nation is $100 million for the immediate acquisition and adoption of this technology. (a) For this nation, identify and explain how much this spending on new technology will change each of the following in the first round: i. Income (GDP) L. Saving i. Consumption (b) Assuming a closed economy and no leakages, identify and explain how much this spending on new technology will change each of the following at the end of the final round: i. Income (GDP) ii. Saving li. Consumption1. Suppose the households in a hypothetical economy has the following consumption function C= a + cYd. Where is the disposable income. The government in this economy imposes a tax rate of to households’ income (ex. A means that 10% of households’ income goes to tax payments). a. What is the equation that describes the disposable income of households? b. What is the Planned Expenditure Equation? Assume that government expenditure is exogenous and Investment function is given by the equation I = I-br Where is the interest rate. c. Derive the equilibrium output in the goods market and show that the multiplier in this model is 1/1c(1-t). d. How does and the tax rate affects this multiplier (e.g., what happens to multiplier if c increases cet.par. , or if tax rate increases, cet.par)?
- Consider an economy in which autonomous consumption, planned autonomous investment, autonomous government expenditure, autonomous taxes, and the marginal propensity to consume are given (there are no net exports). Autonomous consumer spending = $3,000 Ip = $5,000 G = $3,000 T = $4,000 MPC = .75 (a) What is the level of C when Y = $19,000? I need help to know how to calculate this.1) Consider economy T described by the parameters below: C=1500+0.6Y I = 1200 G=2500 X =500 M = 400 T = 1000 a. Identify the marginal propensity to consume (MPC) in T. b. What will be the value of the equilibrium GDP in economy T? Calculate the value of the multiplier for economy T.23) If the marginal propensity to consume (MPC) is 0.8 and if government spending (G) rises by $50 while investment (1) falls by $20, by how much will equilibrium income rise? (Jika kecenderungan mengguna sut (MPC) adalah 0.8 dan jika perbelanjaan kerajaan (G) meningkat sebanyak $50 manakala pelaburan (1) jatuh $20, berapakah kenaikan pendapatan keseimbangan meningkat?) $12 $30 O $120 $150
- 16. Consider a closed economy with demand for goods as follows: yd = C +I+ G C = 200 + 0.80(Y – T) I = 600 G = 1000 T = 1000 a. What is "autonomous expenditure" for this economy? b. Graph this economy's (planned) aggregate expenditure function. Be sure to give the coordinates of at least 2 distinct points in your graph. c. According to the Keynesian Cross model of income determination, what would be the short run equilibrium value of real aggregate income (Y) for this economy? d. If government purchases (G) were to increase to 1,200, what would the new short run equilibrium value of income be? etv MacBook Air 80 888 DII F3 F4 F5 F6 F7 F8 F9 F10 F11 F12 # $ % & ) + 3 4 6 7 8 9 %3D de E Y U P { } [ D F G H J K L + I| ....2. Consider an economy that is characterised by the following set of equations: C co + c¡Yp Yp Y – T I bo + bịY Government spending (G) and taxes (T) are constant. Note that investment (1) is proportional to output (Y). a) Solve for equilibrium output. b) Using your answer derived in (a) identify and discuss the multiplier. How does the relation between investment and output affect the value of the multiplier? c) For the multiplier to be positive what condition must be satisfied? Please note: The two questions are equally weighted in terms of marks. To help explain your answers and analysis, you should always attempt to use diagrams, mathematical demonstration where applicable and convey the economic intuitions behind the results. Do not forget to label your graphs. Key Marking criteria will include: • Initiative: Originality, innovativeness of answer • Assignment Structure: Clarity of aims, objective, structure and presentation • Quality of Writing: Readability and ability to convey…1. Suppose that the economy can be described by the following equations: C= 400 + (8/9)*DI I= 300 G= 800 T=(1/2)*Y (X -М) 3 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept? b. Find the equilibrium level of output. c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending. ii) Calculate the new equilibrium level of income. iii) Calculate the change in income and compare to the increase in government spending. Comment. iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar. v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv). Now G assumes its original value of G = 800. d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level…
- 1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I = 300G = 800T = (1/2)*Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept?b. Find the equilibrium level of output.c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending.ii) Calculate the new equilibrium level of income.iii) Calculate the change in income and compare to the increase in government spending. Comment.iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv).Now G assumes its original value of G = 800.d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level of…Question 8 Real GDP in the economy is $7,900 Billion and the Marginal Propensity to Consume is 0.56. What will Real GDP in the economy be, in $ Billions, after a $10 Billion increase in Government Spending? (Round your FINAL answer to the nearest whole number/integer.) (BE VERY CAREFUL NOT TO ROUND "MIDDLE" CALCULATIONS. ONLY ROUND THE FINAL ANSWER.) (Do not enter a dollar sign, $. or the word "Billion", just the number.)1. Interpret what it means if MPC equals 0.95? 2. If your MPC is 0.9 and your income falls by $200, what will be your change in spending? 3. For each of the following determine whether there is movement along a consumption schedule (function), or a shift of the schedule. If there is a shift then indicate the direction of the shift and interpret that shift. a. Consumer’s expectations became more optimistic. b. An increase in the interest rate. c. There is a current low level of consumer durables on hand. d. Consumer incomes rise.