4. What effect does a temporary increase in government purchases-for example, to fight a war-have on desired consumption and desired national saving, for a constant level of output? Assume that Ricardian equivalence holds (Complete the table below) Increase in government purchases: Desired Consumption, C Desired National Savings (1) (12) What is the effect on desired consumption and desired national saving of a lump-sum tax increase? Assume that Ricardian equivalence holds (Complete the table below) (1) O Increase (1) (2) O Increase (1) O Decrease (1) O Decrease (4) O Unchanged O Unchanged Desired Consumption, C Desired National Saving, S (3) O Increase (1) Decrease (1) O Unchanged (4) O Increase (T) O Decrease (1) O Unchanged A lump-sum tax increase

4. What effect does a temporary increase in government purchases-for example, to fight a war-have on desired consumption and desired national saving, for a constant level of output? Assume that Ricardian equivalence holds (Complete the table below) Increase in government purchases: Desired Consumption, C Desired National Savings (1) (12) What is the effect on desired consumption and desired national saving of a lump-sum tax increase? Assume that Ricardian equivalence holds (Complete the table below) (1) O Increase (1) (2) O Increase (1) O Decrease (1) O Decrease (4) O Unchanged O Unchanged Desired Consumption, C Desired National Saving, S (3) O Increase (1) Decrease (1) O Unchanged (4) O Increase (T) O Decrease (1) O Unchanged A lump-sum tax increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) Consider economy T described by the parameters below: C=1500+0.6Y I = 1200 G=2500 X =500 M = 400 T = 1000 c. Is economy T experiencing a trade deficit or surplus? Explain your answer. d. Differentiate between the term’s leakages and injections, giving examplesto support your response. e. Discuss two (2) factors that may affect consumption in an economy.
4:51 PM Fri Mar 17 :3 21 := Unanswered 23 Unanswered TF Unanswered 21 Unanswered 2 attempts left Numeric answer 1 attempt left Type your response 2 attempts left ● 2 attempts left Suppose the initial change in spending is $12 billion. The indirect effects of that change cause a change in total spending of $24 billion. What is the mpc? 2 attempts left ● 22% Open Open Open Open × Submit ×
6 Suppose a closed economy with no government spending or taxing initially. Suppose also that intended investment is equal to 100 and the aggregate consumption function is given by C = 250 + 0.75Y. And suppose that, if at full employment, the economy would produce an output and income of 3500 By how much would the government need to raise spending (G) to bring the economy to full employment? (round your answer to the nearest whole value)
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy? Equilibrium GDP (Y) = $ . b. What happens to equilibrium Y if Ig changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
Given: I = 150, G = 200, and T = 200, and C=150 +.85Yd Fill in the missing cells. Explain adjustment to equilibrium.
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9. Problems and Applications Q9 Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of decreasing the government budget deficit. O True False What would you need to know in order to judge which of these two policies would be more effective way to raise investment? Check all that apply. ✓ The elasticity of private saving with respect to the after-tax real interest rate The responsiveness of private saving to increases in investment ✔The response of private saving to changes in the government budget deficit
Crowding out appears contradictory to Y-T-C + T-G = I (Assuming EX-IX =0) - if interest rates increase, then assuming the tax cut is permanent a consumer's disposable income increases but due to interest rates increasing it may discourage consumption in period 1 - so I am confused as to what the effect on private saving will be - if private saving is Y-T-C - and T has reduced - what will happen to C if disposable income rises but interest rates also rise?
6. What change in government spending (airports, police, teachers, roads, etc.) would reestablish full employment with price stability? 7. What change in taxes would achieve the same goal? Explain why it is different from the change in government and is the opposite sign. 8. Should we balance the budget in this situation? And why? Q4. Suppose that in the closed economy of Keynesia, consumption is given by C = 100 + 0.75(Y -T). Investment I is constant at 200, government purchases G are 160, and the government’s budget is balanced so G = T. Aggregate supply responds passively to changes in demand, so Y = C+I+G. a. What is the marginal propensity to consume? b. Use algebra to find the equilibrium value of Y, the equilibrium level of income? c. If government spending rises to 180 with no change in taxes, what will happen to the Keynesian equilibrium level of income? What is the government-expenditure multiplier AY/AG? d. If taxes increase to 180 with no change in government spending, what…
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 55 25 -10 6 50 35 -5 5 45 45 0 4 40 55 5 3 35 65 10 2 30 75 15 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.
What the answer ?
In a closed economy, Y = $19 billion C = $15.2 billion I = $1.9 billion TR = $4.0 billion T =$3.0 billion Calculate each of the following (round each answer to one decimal place). Private savings = $ ____billion Public savings = $____billion Total savings in this economy = $____ billion The government's budget deficit or surplus = $____billion (enter a negative number for a deficit, positive number for surplus).