7. Assume consumption is represented by the following: C = 400+.75Y. Also assume that plannedinvestment (I) equals 100.a. Given the information, calculate the equilibrium level of income.b. What is the savings function?c. Given the information, calculate the level of consumption and saving that occurs at theequilibrium level of income.d. Suppose planned investment increases by 100.i. Calculate the new equilibrium level of income.ii. Given your answer, what is the size of the multiplier for this economy?e. Use the Keynesian cross diagram to reflect both equilibrium output.

7. Assume consumption is represented by the following: C = 400+.75Y. Also assume that planned…

Answered: 7. Assume consumption is represented by…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.1P

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Consumption and Savings Functions Disposable Income Consumption Saving -50 100 200 400 a. Please complete the table (assume linear functions) b. How much is Autonomous Consumption and Autonomous Savings? C. How much is mpc, mps, and E ? Write out the consumption funetion and the savings function, Using the data from the table, please graph the consumption and savings schedules in a model. d. e. For an increase in disposable income of $2000, using the current mpc, show five rounds of increases in planned expenditure. f.
6. You are given the following consumption function : C = RM150 million + 0.75Yd Based on the above consumption function, answer the following questions: a. Determine the saving function How much is : b. 1. Autonomous consumption II. Autonomous saving C. How much is the disposable income when saving is zero? d. If there an investment of RM200 million, what will be the new equilibrium level of income. e. If G = 100, calculate the new equilibrium level if government expenditure increased from RM100 to RM150 f. If I = 100, calculate the new equilibrium level if investment decrease to RM50
AGGREGATE PLANNED OUTPUT/INCOME CONSUMPTION INVESTMENT 2,000 2,100 300 2,500 2,500 300 3,000 2,900 300 3,500 3,300 300 4,000 3,700 300 4,500 4,100 300 5,000 4,500 300 5,500 4,900 300a. At each level of output, calculate saving. At each level of out- put, calculate unplanned investment (inventory change). What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What is the equilib- rium level of output?b. Over each range of income (2,000 to 2,500, 2,500 to 3,000, and so on), calculate the marginal propensity to consume. Calculate the marginal propensity to save. What is the multiplier?c. By assuming there is no change in the level of the MPC and the MPS and planned investment jumps by 200 and is sus- tained at that higher level, recompute the table. What is the new equilibrium level of Y? Is this consistent with what you compute using the multiplier?
Assume the following consumption schedule: C= 20 + 0.9 Y, where C is consumption and Y is disposable income. At $1,100 level of disposable income: (show your cacuators) a. Find out the level of saving and consumption? b. How much are the APC and APS (to one decimal place)? c. If dispr able income increased to $2,800 and saving is $345 now. What are MPC and MPŚ (to two decimal places)?
18. According to the income and consumption schedules shown above, the marginal propensity to consume is(A) 1.33(B) 0.90(C) 0.80(D) 0.75(E) decreasing as real disposable income How come MPC equals 0.75?
Consumption function C = 32 +0.8 Y. a. Create saving function b. How much is consumption when saving = 0 c. How much income when the savings are 20
Problem 1. Given the saving function S =-10 + 0.2y and autonomous investment, I =5 crore. (i) Find the equilibrium level of income. (ii) Find the level of consumption. (iii) If investment increases permanently by 5 crores, what will be the new levels of income and consumption?
5. If investment also depends on real income, say I = g0 − g1r + g2Y what is the slope of the IS curve?
a. Calculate the missing values in the table below given that the Aggregate Consumption Function for a country is equal to C = 150 + 0.75Y, and planned investment is fixed at 300. Aggregate Consumption Investment (C) Planned Aggregate Output (Income) (Y) Planned Aggregate Expenditure (AE) Unplanned Inventory Change (Y-AE) Equilibrium (1) 1,500 300 1,800 300 2,100 300 2,400 300 2,700 300 b. What is the equilibrium level of output? What is likely to happen to aggregate output if the economy produces at below the equilibrium level? C.
Macroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.
2. We have the following information on the economy: - Aggregate consumption is $1,000 when aggregate disposable income is zero. - When aggregate disposable income is $17,500, aggregate saving is $2,500. a. Find the equation for the aggregate consumption function. b. The planned investment in this economy is $2,000. Find the equation for the aggregate expenditure function.
An increase in expected future income________. Select one: A. decreases consumption expenditure B. increases saving C. shifts the consumption function upward D. shifts the saving function upward

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