1) Derive the IS curve. ) What happens to the IS curve if G increases by AG = 100 financed with a corresponding increase in T by AT = 100? Why? Does the slope of IS curve changes? Does such policy lead to the shift of IS curve? :) What happens to the IS curve if the marginal propensity to consume (MPC) suddenly jumps to 0.6? Why? Does the slope of IS curve changes? Does such this lead to the shift of IS curve? ) Derive the LM curve. e) Find the equilibrium values of Y and r. O The central bank wants to increase GDP by 20 by changing the money supply. What should be the new real money supply? z) Suppose the demand for money becomes less sensitive to changes in the interest rate. What should happen to the money demand equation provided above? What would change in that equation and in wyhat direction? Would that make the fiscal or the monetary policy

1) Derive the IS curve. ) What happens to the IS curve if G increases by AG = 100 financed with a corresponding increase in T by AT = 100? Why? Does the slope of IS curve changes? Does such policy lead to the shift of IS curve? :) What happens to the IS curve if the marginal propensity to consume (MPC) suddenly jumps to 0.6? Why? Does the slope of IS curve changes? Does such this lead to the shift of IS curve? ) Derive the LM curve. e) Find the equilibrium values of Y and r. O The central bank wants to increase GDP by 20 by changing the money supply. What should be the new real money supply? z) Suppose the demand for money becomes less sensitive to changes in the interest rate. What should happen to the money demand equation provided above? What would change in that equation and in wyhat direction? Would that make the fiscal or the monetary policy

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 3 of 16 Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest to smallest. Largest MPC Smallest MPC Answer Bank Bert Doug Eli Carter Al Name Income change Consumption change Al +$5,000+$5,000 +$3,000+$3,000 Bert +$2,500+$2,500 +$800+$800 Carter +$1,000+$1,000 +$800+$800 Doug −$2,500−$2,500 −$1,750−$1,750 Eli −$5,000−$5,000 −$2,000−$2,000
37. If the equilibrium level of GDP is $30,000, using the equations for C, I, G, and NX shown above, find the value of the marginal propensity to consume. C=4,000+ 0.5Y I= 1,500 G=2,250 NX=-150
True/False: Every point on the IS curve represents an equilibrium in the Goods and Service market (i.e. the output market). O True False
97) You observe that unplanned inventories are increasing. You predict that there will be ________. A) a business cycle B) an expansion C) a trough D) a recession 98) Business cycle turning points are A) unaffected by, and unrelated to the multiplier. B) easy to predict. C) brought about by changes in autonomous expenditures that are then subject to the multiplier effect. D) None of the above is correct. 99) Which of the following does NOT occur as the economy moves from an expansion to a recession? A) An initial decrease in autonomous spending is the trigger that creates the business cycle turning point. B) The change in planned spending exceeds the change in real GDP. C) The multiplier process reinforces any decrease in spending and pushes the economy into recession. D) Incomes fall during recessions as firms cut production in response to unplanned increases in inventories. 100) Which of the following is INCORRECT? A) Expansions usually begin…
6) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁+C₁YD Y₁ = Y-T I=b₁ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must (c₁ +b₁ ) satisfy? Explain your answers? b. Suppose that the parameter bo, sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? Why? What will happen to national saving?
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Which one of the following statements relating to marginal propensity to consume is INCORRECT? (a) Marginal propensity to consume for a given consumption function is usually less than 1; (b) If the people in a country save 30c out of every rand they earn, the marginal propensity to consume in this country is said to be 0.7; (c) If the marginal propensity to consume is given as 0.622, then the value of the simple multiplier will be 2.5; (d) The larger the value of the marginal propensity to consume, the steeper the consumption function will be.
d. Now G assumes its original value of G = 800. Congress decreases the tax rate from (1/2) to (1/4). i) Use a model to sketch the effect of the decrease in the tax rate when the price level is held constant. ii) What is the new marginal propensity to consume? iii) Calculate the new equilibrium level of income.
As shown in Exhibit 2, the marginal propensity to consume (MPC) is: Group of answer choices 0.33. 0.50. 0.67. 0.75.
Answer the next question based on the following diagram. The marginal propensity to consume in the diagram below is: Answer the next four questions based on the following diagram. C+I+G 200 875 0.955 O.765 0675 1600 -C=Y -C -NI/GDP