8. The income-expenditure modelConsider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumptionfunction, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes:C = 20+0.75 x (Y-T)Suppose G=$35 billion, I = $60 billion, and T = $20 billion.Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y = C + I + G, the equilibrium outputlevel is equal to $billion.Suppose the government purchases are increased by $50 billion. The new equilibrium level of output will be equal toBased on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(a) Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively. What is MPC, MPS and autonomous consumption Derive the saving function. What is the equilibrium level of income? Y= AD=C+I+G If government purchases increase to $150 million, what is the new equilibrium level of income? What level of government purchases is needed to achieve an income of $2000 million? From question e) you get the newly government purchase. Now find out the multiplier value What is the amount of shift in AD curve? [Use the multiplier value from e)] (b) In a self-regulating economy “X”, labor supply is 40 million but labor demand is 10 million. What will happen in goods and service market simultaneously? Explain this situation with relevant graph. Based on your findings in a) is it denoting long run equilibrium? If not, will the economy be able to restore…
In the country of Arcadia, the minimum amount of consumption spending that will occur in a given year is $50- that is, no matter what level of income households have, the aggregate amount of consumption spending in the economy will be at least $50. In addition, for every extra dollar of national income, consumption spending will increase by $0.75. (Note: For the entirety of this problem, assume that Taxes = trans fers = 0, and the aggregate price level in Arcadia is fixed.) a. What is the marginal propensity to consume in Arcadia? [TYPE YOUR ANSWER BELOW] b. Write out the consumption function for the Arcadian economy. [TYPE YOUR ANSWER BELOW]
- If an economy is in equilibrium when national income is $1000, and the level of autonomous expenditure is $600, what is the value of the marginal propensity to withdraw? - Imagine an economy where autonomous expenditure is $50, and the equilibrium level of national income is $125. How much would autonomous expenditure have to increase by to achieve full employment output of $150 ?
problems 2, 3, and 4 please
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4. Planned expenditure and income The following table shows consumption (C), investment spending (I), and government purchases (G), in a hypothetical economy for various levels of income. Also assume that there is an income tax rate of 25%, that base consumption is $100 billion, and that the MPC is 0.333, or 1/3. This economy is closed, with no international trade, therefore net exports are equal to zero and should not be considered. Use the given information to fill in disposable income, consumption, and planned expenditures in the following table. Income: Real Disposable (After Tax) Planned GDP Income C I, G Expenditures (Billions of (Billions of dollars) (Billions of (Billions of (Billions of (Billions of dollars) dollars) dollars) dollars) dollars) 100 50 150 100 50 150 200 50 150 300 50 150 400 50 150 500 50 150
Suppose that we are in an economy with international trade, the government, domestic consumption, and investment. The government retains a tax rate of 10%. - Suppose that we observe this economy at two levels of national income (Y) ceteris paribus: (i) Y = 1,000 and (ii) Y = 1,800. The amounts for each of these desired expenditure categories at each of these levels of Y are given by: At Y = 1,000: + Consumption = 1,000 - Government Spending = 550 %3D Investment = 150 %3D Imports = 100 t Exports = 150 At Y = 1,800: 4 Consumption = 1,560 - Government Spending = 550 Investment = 270 e %3D Imports = 180 Exports = 150 Based upon this data, answer the following questions. We will keep referring to four categories - these are Consumption (C), Investment (1), Government Spending (G), and Net Exports (NX). « | 1. Plot both of the Desired Consumption and Desired Savings Functions, with Y on the x-axis and C & S on the y-axis. Label both functions' y-intercepts, and the x-intercept for the…
One last time, please consider a closed economy with the following information: • Economic investment = $4500 • Private savings = $3000 Output (income) = $16,000 Consumption = $11,000 This economy has no transfer payments; in other words, total taxes and "net taxes" are the same thing. Carefully following all numeric instructions, calculate this economy's taxes (T). Note that there are no transfer payments.
Table 11-6 Government Real GDP Consumption Investment Purchases 1 Net Exports $1,000 $1,000 $100 $150 -$50 2 3 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4 4,000 3,700 100 150 -50 Using the table above, answer the following question. The numbers in the table are in billions of dollars. 13) Refer to Table 11-6. What is the value of MPC? A) 0.2 B) 0.5 C) 0.75 D0.9 E) None of the above
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