8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, Gis government purchases, andT stands for net taxes: 40 + 0.5 x (Y-T) Suppose G- $315 billion, I- $50 billion, andT-$10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y C+1+G, the equilibrium output level is equal to billion. Suppose the government purchases are reduced by $200 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to

8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, Gis government purchases, andT stands for net taxes: 40 + 0.5 x (Y-T) Suppose G- $315 billion, I- $50 billion, andT-$10 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y C+1+G, the equilibrium output level is equal to billion. Suppose the government purchases are reduced by $200 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A9
1. Consumption = 13,309 Exports = 2,316 Government purchases = 3,331 Saving = 6,607 Government budget deficit = 4,000 Imports = 2.883 %3D a. What is gross domestic product? GDP = b. What is investment? c. What is disposable income? Yd =. d. What is the level of government transfers minus taxes?
Aggregate Expenditures and Multipliers Assignment a. Using the aggregate expenditure function above, what is the current level of real GDP? b. Using the aggregate expenditure function above, what would be the level of real GDP if the aggregate expenditure function shifted up by $0.2T? c. If Investment expenditures increase by $300B and MPC is equal to 0.90, what will be the increase in real GDP? d. If Government expenditures increase by $800B and MPS is equal to 0.05, what will be the increase in real GDP?
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- 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 ?
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:
problems 2, 3, and 4 please
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…