1. Use the following information from a fictional economy: Consumption, C = 250 + 0.8 Yd Investment, I = 200 Government Spending, G 100 Taxes, T = 0.2 Y Net Exports, NX = 50 - 0.4 Y Disposable Income, Yd = Y-T Real GDP = Y (a) What is equilibrium Real GDP (Y) for this economy? (b) What is equilibrium C for this economy? (c) What is equilibrium NX for this economy? (d) What is equilibrium T for this economy? (e) What is equilibrium YD for this economy?
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- 1. Draw a graph to illustrate the desired aggregate expenditures of an economy whose participants have the following spending plans: C= $10 + 0.8Y I= $20 G= $30 X-M = $10 (a) What is the value of equilibrium output? (b) Assuming that the full-employment level of output is $300, what kind of gap exists and how large is it? Identify the gap on the graph. (c) How much are consumers saving at full employment?graph below shows the economy oOT Japan. Planned Aggregate Expenditures 2400- 2100 1800- 1500 1200 AE 900- 600 AE Y 300- Potential Output 00 200 tobd 200d 2400 40 Reset Real income (in dollars) a) What type of gap exists in this economy, and how big is that gap? (Select one) $ 0 b) By how much must government expenditures change to eliminate this gap? (Select one) $ 0 c) Demonstrate this graphically in the graph above. Real aggregate expenditures (in dollars)1. (a) The following equations describe an economy: C-100+ 0.75Yd I-50-25r T-G-50 Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I is taxes, G is government purchases and r is the rate of interest. Derive the IS curve for the economy. Show the area of excess demand and excess supply in the goods market. (b) Draw the graph and explain the derivation of IS curve. 2. (a) Given the following data about the monetary sector of the economy: Ma -0.4Y-80r M₁ - 1200 million Where, Ma is demand for money, Y is the level of income, r is the rate of interest and M, is the supply of money. Derive the equation for LM curve and give the economic interpretation of this curve. Show the excess demand and excess supply in the money market. (b) Draw the graph and explain the derivation of LM curve. 3. Consider the following economy: C-100+ 0.8Yd I-50-25, G-T-50 M' P -200 M₁-Y-25r 1. Calculate the IS and LM curves. 2. Calculate the equilibrium levels of output (national…
- 11. Explain the central problems of an economy?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?Question Another important aspect of Tourism Economics is the multiplier effect, which refers to the additional economic activity generated by tourism spending. When tourists spend money in a destination, it circulates through the local economy, benefiting not just the direct recipients of this spending but also other businesses and their employees. For example, tourists spending money in local restaurants support not only the restaurant staff but also local suppliers and their workers. The multiplier effect in Tourism Economics is essential because it: A) Reduces overall economic activity B) Only benefits the tourism sector C) Generates additional economic activity beyond the initial spending D) Leads to economic stagnation
- 1- Suppose that the economy is characterized by the following behavioral equations: C= 160 +0.7YD, T= 100, 1= 150. NX = 100 – 0.1Y. G=150, a What is disposable income (YD)? b. What is equilibrium GDP (Y)? c. What is consumption spending at the equilibrium (C)? d. What is the value of multiplier? e. If government spending increases by 100 units how much does equilibrium income change? f If government increases both taxes and government spending by 100 units how much does equilibrium income change? g. If this was a closed economy (NX-0), what would be the value of multiplier? Compare with the value you obtained previously for the open economy, and comment on why they are different. ICtrl) -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-How do you apply the opinion of Prof. Nurkse in Niger on the supply side of vicious circle that “there is small capacity to save resulting from low level of national income?
- 1. An economy has the following variables: Goods Market: Y=500 C=25 + 2/3 (Y-T)-100r I=120-300r G=75 T=50 a) Graphically draw (a rough sketch is fine) of the goods market. Assuming you start at the closed economy equilibrium what is the initial r, S, I? b) Suppose that there is a reduction of G by 25, What is the new r, S, I? Show this graphically. c) Starting with the initial information suppose instead that there is a reduction of I by 25, What is the new r, S, I? Show this graphically.3. Many parts of the economy are related to one another. In particular, a decrease in spending in one area may have an impact somewhere else. Provide an example of this scenario. Economic theory tells us that "one person's spending is another person's income." What is meant by this phrase? Explain in your own words.3) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁₂ +G₁Y₂ Y₂=Y-T 1=b₂ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. b. 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 ( + b) satisfy? Explain your answers? bo C. Suppose that the parameter 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?