1. Suppose that the economy can be described by the following equations:C= 400 + (8/9)*DII= 300G= 800T=(1/2)*Y(X -М) 3 0.a. If national income (Y) increased by $1, by how much would consumption increase? What isthe 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 incomewhen government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compareto 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 income.e. Suppose that voters care more about reducing unemployment than the level of the federaldeficit. If you were running for Congress this year (and you wanted to win the election), wouldyou promise to increase or to decrease government spending? Explain your answer.

Disclaimer: As per Bartleby's policy, I am providing you with the answers to the first three…

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 – 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.

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 – 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: 1. In the circular flow model, a state of equilibrium is reached when: A) savings are equal to…

A: As you have posted multiple questions, but as per guidelines we are supposed to answer the only…

Q: Consider the following consumption function: C = 800 + 0.75 YD for the fictitious economy of…

A: Transfer-Payments(TP) have the opposite effect of Taxes(T). Taxes reduce the consumers…

Q: The equilibrium position for an economy is represented by the following equations: Y = C + I, + G…

Q: 1. Use the following lon from a fictional economy: Consumption, C = 250 + 0.8 Yd Investment, I = 200…

A: NOTE:Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Assume that the economy is now governed by a government and begins trading with other economies. The…

A: Equilibrium in the market occurs where income is equal to aggregate expenditure.

Q: Assume the following: • Tax Rate (T) = 0.25Y Consumption (C) = $150 +0.9(YT) • Investment (1) = $200…

A: We are give the data of four sector model, Firstly we have to find the value of multiplier in this…

Q: (M: 10,000 Government Spending (G): 1,500 Desired Consumption (C): 8,500 If the goods market is in…

A: here we calculate the desired level of investment in a closed economy by using the given information…

Q: 5. Find the equilibrium output for the following economy C = 120 + 0.5(Y – T); I = 250 – 10r; G =…

A: Answer: To find the equilibrium output for this economy we have to equate the IS-curve and LM-curve…

Q: None

A: Show draftsvolume_upSolving for Equilibrium GDP in EconomikaWe can solve for equilibrium GDP in…

Q: Question 7 (i) (ii) (iii) (vi). Consider the economy with following components of aggregate…

A: The total sum of consumption expenditure, investment expenditure, government expenditure, and net…

Q: a) About Country A, what is your estimate of the country's marginal propensity to consume (MPC)…

A: Given,

Q: 24. Using the macroeconomic data in #21 above and assuming (i) a full employment economic output of…

A: 24. AG=5 Fiscal Multiplier = ∆Y/∆G => AY = 4 * 5 = 20 Thus, Increase in government expenditure…

Q: Based on the economic data of a country presented in the following table, complete the table!…

A: The entire quantity of demand for all finished products and services generated in an economy is…

Q: Assume an economy has a consumption function of C = 0.87 (Yd) + $270.18. Additionally, this economy…

A: The economy is in equilibrium when real GDP (Y) is equal to aggregate expenditure, whereAggregate…

Q: Q1: There are two equations for macroeconomic equilibrium in an economy. State them Show…

A: Macroeconomic equilibrium can be defined as a point wherein the amount of aggregate demand rises to…

Q: 1) In the table below, C is consumption expenditure, I is investment, G is government expenditure,…

A: Aggregate expenditure is the total consumption of final goods during an accounting year. AE = C + I…

Q: Assume that GDP (Y) = 5,000 Consumption: C = 1,300+(0.4(Y-T)) - 240 r; where r is the real interest…

A: GDP stands for Gross Domestic Product. It is a key indicator used to measure the economic…

Q: In the country of Borealis, the minimum amount of consumption spending that will occur is $300 -…

A: C=300+0.75Y I=100 G=100 X=M=T=0

Question

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 of income.
e. Suppose that voters care more about reducing unemployment than the level of the federal
deficit. If you were running for Congress this year (and you wanted to win the election), would
you promise to increase or to decrease government spending? Explain your answer.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

1.12 Study the following diagram and answer the question that follows. Expenditures (billions of dollars per year) > > 3500 3000 2500 2000 1500 1000 500 Figure 9.1 500 1000 1500 2000 2500 3000 3500 Income (billions of dollars per yazari At an income level of $2,000 billion, a) Consumption equals $1,500 billion. b) Saving equals $0. c) The MPC equals 0.80. d) There is dissaving. F 뉴 C connex
Question 1: In an economy C = 350 + 0.75 Y is the consumption function where C is consumption expenditure and Y is national income. Investment expenditure is 4,000. a) Calculate equilibrium level of income. b) Calculate consumption expenditure.
25
7. Question 3. The consumption function Consider the hypothetical country of Kejimkujik. Suppose that national income in Kejimkujik is $12 billion, households pay $4 billion in taxes, household consumption is equal to $6 billion, and the marginal propensity to consume (MPC) is 0.625. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 20 18 16 14 12 10 8 OF 6 4 2 0 6 8 10 12 14 16 DISPOSABLE INCOME (Billions of dollars). 18 20 Consumption Function
Q1:You are given the following income-expenditures model for an economy : Consumption C = 300 + .64Yd Tax (T) = $60 Government expenditure G = $100 Investment (I) = $120 From above data calculate the follows: 1. Equilibrium level of income 2. At the equilibrium level of income, what is the amount of consumption?
From the information above, calculate the level of consumption and saving that occurs at the equilibrium level of income.
The economy is in equilibrium such that Planned Aggregate Expenditure (AE) = Aggregate Output (Y) = 1,200. We have earlier observed that when Y increased from 900 to 1,200 Aggregate Consumption (C) increased from 800 to 1000. If investments increase by 55, how much will Aggregate Income change from its current value of 1,200? 110 82.5 165 1,365 1,310
Given the following model of an Economy as follows:- (10 marks) C = 50 + 0.7 Yd (Yd = Y-T) (Consumption & Expend) I = 100 (Investment Expend) X = 20 (Exports ) M = 10 – 0.27 (Imports) T=25 interepret the consumption Function i) Determine Equilibrium level of National Income ii) Consumption level at Equilibrium level of Income iii) Total import at equilibrium Income
am. 201.
Question 2 Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Aggregate expenditures ($ millions) 225 200 175 150 45° AE 100 200 300 Aggregate output ($ millions) Figure 23.9 a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Show your work. b) Refer to Figure 23.9. What is the equilibrium level of output in this economy? State the equilibrium condition used to determine this. c) Explain the forces that maintain/drive the economy to this equilibrium by considering what will happen at the following two levels of output, $300 million and $100 million. You will need to discuss changes in investment through unplanned inventories and the response of output. d) Refer to Figure 23.9. How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million? e)The interest rate is an exogenous factor that effects the level of investment in an economy.…
15. Total expenditures in a country (in billions of dollars) are increasing at a rate of f(x) = 8.22x+87.13, where x = 0 corresponds to the year 2000. Total expenditures were $1584.9 billion in 2002. a. Find a function that gives the total expenditures x years after 2000. b. What will total expenditures be in 2016? a. What is the function for the total expenditures? F(x)= (Simplify your answer. Use integers or decimals for any numbers in the expression.) b. In 2016, total expenditures will be S (Type an integer or a decimal.) billion.
n an effort to make sales projections, M/s K, B and A, the three B-school executives of Vengaboys Inc., were discussing about the national income and its growth in Ibiza. K had estimated a linear consumption function for Ibiza to be C = 100 + 0.6 Y, and investment to be I = 100 per ear. In Ibiza, there was no income tax and government spending was minimal (assume 0). Ibiza was a closed economy, and hence no exports and imports. (i)K immediately knew what the investment Multiplier was. Can you find out? (ii)What is the level of income in Ibiza? (iii)K estimated that with Government spending 100 on a new road to be constructed, the income levels are sure to go up. K quickly calculated the change in income and the new income level to be: