Consider a closed economy where the goods and money markets are described by the following relationships: C = 500+ 0.8(Y – T) I = 500 - 10r M P = 0.1Y35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate.

Q: Suppose that business executives are very optimistic, and they raise their investment spending. What…

A: Keynesianism, due to its potential to ease economic downturns through government involvement, gained…

Q: a. By how much will GDP change if firms increase their investment by $8 billion and the MPC is 0.9…

A: Due to multiplier effect there will be an increasing effect in GDP due to investment.

Q: Explain why investment (I) varies more from year-to-year than consumption (C).

A: Lets understand the factors on which the investment depends: 1. Marginal efficiency of capital: It…

Q: How would an increase in the interest rate affect consumption and investment function?

A: Consumption signifies the amount of currencies spent on buying current goods and services by the…

Q: Table 2 shows elements in the national income accounts of an economy. Assume the economy is…

A: C) The marginal propensity to consume: MPC=change in consumptionchange in income Change in…

Q: What does the consumption function show

A: In an economy, households are the people who serve their services as labor or as a self-employed…

Q: Consider the circular flow of expenditure and income in the Canadian economy. Which of the following…

A: The circular flow of income and expenditure basically refers to the mechanism through which an…

Q: 1) If investment spending depends on GDP, this is called induced investment? T/F 2) A change in…

A: When a good is manufactured with the use of factors of production, cost  takes place for producing…

Q: In the future report of U.S. Gross Domestic Product (GDP) for Quarter 1 of 2023, which of the…

A: Gross domestic product (GDP) measures the money value of all final goods and services produced…

Q: The marginal propensity to consume is is .3 find the marginal propensity to save.

A: Given the marginal propensity to consume (MPC) = 0.3 MPS = ?

Q: If the consumption level is $84 and the saving is $44 find the value of the national income???

A:

Q: From the graph above, complete the aggregate expenditure function from the information provided. (…

A: Aggregate expenditure is the total amount of spending in the economy that determines the level of…

Q: The table gives you information about the economy of Australia. Disposable income Saving Consumption…

A: The relationship between disposable income, saving, and consumption expenditure is a fundamental…

Q: In an economy the change in income is $2300 and change in investment is $700   What will be the…

A: We know that investment multiplier can be calculated as  Investment multiplier = change in income /…

Q: Determine equilibrium levels of income and consumption for the following…

A: Consumption (C) is the usage of commodities and services by a household. The consumption function…

Q: Differentiate between an induced increase in consumption and in autonomous increase in consumption…

A: Autonomous consumption is the level of consumption without income. On the other hand, Induced…

Q: How is it possible for consumption expenditure to be positive even when disposable income is…

A: Even when disposable income is zero, consumption expenditure can still be positive because…

Q: Calculate consumption expenditure given that:- APC = 0.16 Income = $5000

A: The data presented in the question above is:- Average propensity to consume = 0.16   Income = $5000…

Q: Assume an economy has a consumption function of C = 0.87 (Yd) + $270.18. Additionally, this economy…

A: The economy is in equilibrium when real GDP (Y) is equal to aggregate expenditure, whereAggregate…

Q: In an economy, income rises by $10,000 as a result of rise in investment Expenditure by $1000.…

A: The given information is as follows:- Rise in income = $10,000 Rise in investment expenditure =…

Q: The consumption expenditure and output of the country is 500 billion and 100 billion respectively.…

A: Given the consumption (C) = 500 billion National income (Y) = 100 billion

Q: If consumers decide to increase saving, then C decreases, r decreases, I increases, and Y:

A: Money is placed aside for future use or accumulation over a defined length of time through the act…

Q: Calculate the value of change in consumption if change in income is $2200 and MPC is 0.34

A: (Q) Calculate the value of change in consumption if a change in income is $2200 and MPC is 0.34

Q: uestion 1: In an economy C = 350 + 0.75 Y is the consumption function where C is consumption…

A: We measure the output of an economy using the gross domestic product. GDP or the gross domestic…

Q: An economy's consumption function is depicted in the table below. Disposable Income (Yd) ($…

A: MPC, marginal propensity to consume is the proportion of change of income used on consumption when…

Q: What is the difference between aggregate expenditure and aggregate demand? Why is the aggregate…

A: Aggregate expenditure may increase with increase in proce. Aggregate demand may be having inverse…

Q: MPC in an economy is 0.8. If investment is increased by $5 million, how much would be increas in…

A: Marginal propensity to consume = 0.8 Increase in investment = $5 million

Q: If consumption expenditure is $3100 and savings is $1800 Calculate income

A: According to the above mentioned question, we have:- Consumption expenditure = $3100 Savings = $1800…

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.