a. If investment is x, draw the aggregate expenditure function (which depicts total consumption plus investment for every level of income). Include in your graph the original consumption function and the aggregate expenditure function. b. If investment is x, mathematically determine the equilibrium level of income. (Hint: remember the equilibrium condition and note that the equilibrium level of income will be a function of x, the investment amount) c. If investment increases by 100: i. ii. Determine the change in equilibrium income using the multiplier effect. Determine the change in your equilibrium income using the equilibrium you derived from (b). Are your answers the same? Now, enter a government that levies a tax on the consumers. The economy is still closed. Now, disposable income equals income minus taxes. d. If government spending is 500, taxes are t, and investment is x, determine the equilibrium level of income. (Hint: remember the equilibrium condition that desired spending = income, and remember that disposable income equals income minus taxes, now, your equilibrium income will be a function of x and t)
a. If investment is x, draw the aggregate expenditure function (which depicts total consumption plus investment for every level of income). Include in your graph the original consumption function and the aggregate expenditure function. b. If investment is x, mathematically determine the equilibrium level of income. (Hint: remember the equilibrium condition and note that the equilibrium level of income will be a function of x, the investment amount) c. If investment increases by 100: i. ii. Determine the change in equilibrium income using the multiplier effect. Determine the change in your equilibrium income using the equilibrium you derived from (b). Are your answers the same? Now, enter a government that levies a tax on the consumers. The economy is still closed. Now, disposable income equals income minus taxes. d. If government spending is 500, taxes are t, and investment is x, determine the equilibrium level of income. (Hint: remember the equilibrium condition that desired spending = income, and remember that disposable income equals income minus taxes, now, your equilibrium income will be a function of x and t)
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
Problem 4TY
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![4. Consider a consumption function given by
C = 0.8Y + 2000
Assume first a closed economy with no government. (Then income = disposable income)
a. If investment is x, draw the aggregate expenditure function (which depicts total
consumption plus investment for every level of income). Include in your graph
the original consumption function and the aggregate expenditure function.
b. If investment is x, mathematically determine the equilibrium level of income.
(Hint: remember the equilibrium condition and note that the equilibrium level of
income will be a function of x, the investment amount)
Assignment 3 - ECO211
c. If investment increases by 100:
i.
ii.
Determine the change in equilibrium income using the multiplier effect.
Determine the change in your equilibrium income using the equilibrium
you derived from (b). Are your answers the same?
Now, enter a government that levies a tax on the consumers. The economy is still closed.
Now, disposable income equals income minus taxes.
d. If government spending is 500, taxes are t, and investment is x, determine the
equilibrium level of income. (Hint: remember the equilibrium condition that
desired spending = income, and remember that disposable income equals income
minus taxes, now, your equilibrium income will be a function of x and t)
e. If taxes increase by 100:
i.
ii.
Determine the change in equilibrium income using the tax multiplier.
Determine the change in equilibrium income using the equilibrium you
derived from (d). Are your answers the same?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F49eb83ff-3acd-4295-9ce3-cf2f85b3fb97%2F3300e763-79e0-439a-bae8-e0963a6eac3d%2Fhccy0fa_processed.png&w=3840&q=75)
Transcribed Image Text:4. Consider a consumption function given by
C = 0.8Y + 2000
Assume first a closed economy with no government. (Then income = disposable income)
a. If investment is x, draw the aggregate expenditure function (which depicts total
consumption plus investment for every level of income). Include in your graph
the original consumption function and the aggregate expenditure function.
b. If investment is x, mathematically determine the equilibrium level of income.
(Hint: remember the equilibrium condition and note that the equilibrium level of
income will be a function of x, the investment amount)
Assignment 3 - ECO211
c. If investment increases by 100:
i.
ii.
Determine the change in equilibrium income using the multiplier effect.
Determine the change in your equilibrium income using the equilibrium
you derived from (b). Are your answers the same?
Now, enter a government that levies a tax on the consumers. The economy is still closed.
Now, disposable income equals income minus taxes.
d. If government spending is 500, taxes are t, and investment is x, determine the
equilibrium level of income. (Hint: remember the equilibrium condition that
desired spending = income, and remember that disposable income equals income
minus taxes, now, your equilibrium income will be a function of x and t)
e. If taxes increase by 100:
i.
ii.
Determine the change in equilibrium income using the tax multiplier.
Determine the change in equilibrium income using the equilibrium you
derived from (d). Are your answers the same?
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