Consider a small macroeconomy located near the South Pacific Ocean where the current interest rate is 15 percent and the potential level of realGDP equal to $2.7 billion. Consumers spending behavior is described by the equation: C = 175 + 0.8DI, while firm's investment spendingbehavior is described by the equation: 1 = 60 +0.25Y-750r. Trade is allowed and currently, total exports is fixed at $150 million while totalimports is described by the equation: IM = 320 + 0.1Y. The government's spending is fixed at $840 million and net taxes is described by theequation: T=50 +0.25Y.(Question 4 of 6)Consider that actual rate of unemployment is 5 percent and the current government implements a monetary policy to stabilize the currenteconomic environment.Given the government's policy, what will be the new equilibrium level of GDP (in millions of dollars)? (report your answer at 2 decimal places)

The objective of the question is to find the new equilibrium level of GDP given the government's…

Answered: Consider a small macroeconomy located…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 8 As a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y- 13250: The function that describes consumption is the same, cd(r) = 5000 – 1000r +0.25Y, but the investment curve shifted to the right: 1d(r) = 550 – 1800r + 0.2Y: This is because firms expect growth to continue in the future and want to invest more. Government spending is also the same: G- 180o0. The world interest rate is 5%. What is Neverland's current account balance? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.
The tax cuts of 2008 and 2009 reduced the disposable income of U.S. consumers. True or False
Suppose an economy is experiencing a high rate of housing foreclosure due to an economic downturn. The government decides to invest in highway construction projects to stimulate economic activity and create jobs. As a result of these projects, the human capital in the construction sector increases, leading to better job prospects. Given the following information: Initial housing foreclosure rate: 8% Increase in highway construction investment: $500 million Percentage increase in human capital in the construction sector: 12% Change in housing foreclosure rate after the construction projects: -2.5% Calculate the new housing foreclosure rate after the highway construction projects.
Assume that the production function for a country is given by Y=√K and annual investment is given by the function I=γ×YI where γ=0.280, and that the yearly depreciation rate is 4.67%. Suppose that this year, the output in the country is 1, and a neighbor country's output is 50% higher. Calculate the time it would take for the country's output to catch up with its neighbor's output. Assume the neighbor country's economy is neither growing nor shrinking.
Question 3 This question refers to an economy in two different situations. Situation 0 (Initial situation) is described in Table 1 and Situation 1 (New situation) is described in Table 2. In both situations, the potential output is Y=2,000. Concept Consumption function |Тахes Investment Government purchases |Quantitative Information |C=550+0.5×(Y-T) T=100 I=50 |G0=100 Table 1 (Situation 0: Initial situation) Concept Consumption function |Тахes Investment Government purchases |Quantitative Information |C=550+0.5×(Y-T) T=100 |I=50 |GI=200 Table 2 (Situation 1: New situation) a. Find the equilibrium income Y* in the initial situation b. Find the equilibrium income Y** in the new situation c. What is the numerical value of the multiplier of government purchases? d. Draw a 45° diagram showing the two equilibrium situations and identify in your diagram both the change in Y (=AY) and the change in GG (=AG). e. After the fiscal stimulus, is this economy in equilibrium with unemployment?…
Consider an open economy with a current population of 0.55 million people, and where the potential GDP is $ 3.24 billion. Consumer expenditure is represented by the following equation: C = 60+ 0.75DI. Exports are constant at $500 million, and investors want to spend $ 400 million at every level of income. The government purchases are $300 million, imports are constant at $ 450 million, and taxes are $200 million. - What is the current equilibrium level of real GDP? (report your answer at 2 decimal places and in millions of dollars)
At an aggregate output level of $400 billion what is aggregate savings?
Suppose that private savings and investment functions are given by: S = −c0 + (1 − c1)(Y − T) I = b0 + b1Y with G = T = 0. Assume 0 < b1 < 1−c1 < 1 (i.e. that slope of the savings curve is steeper than that of the investment curve). (a) Model Basics: Draw a graph of the investment=savings model with S,I on the vertical axis, and Y on the horizontal axis. Clearly label the 1) specific values of each intercept, 2) specific values of the slopes of each curve. (b) Suppose consumers choose to save more by reducing consumption at any given level of income, so that c0 declines. Show this on the graph. What are the effects of this change on 1) output, 2) the level of private savings, 3) the level of investment. (c) Briefly describe the economic intuition behind your results. Why is this called the paradox of thrift? (1-2 sentences is fine). (d) Deriving the Model: Show that the equilibrium condition Y = C + I + G implies I = S + T − G
Figure 9.1 TE 45° TE2=C+I2+G+(X-IM) TE:=C+I+G+(X-IM) AI=100 Y1 Y2 If the $100 increase in investment in Figure 9.1 increases income by $1,000, then the MPC is: O 0.1 O 0.9 0.8 0 1 O 10
The production function for a company is P = 300x 0.75 0.25, where P is the amount produced given x labor and y units of equipment. Each unit of labor costs $900 and each unit of equipment costs $350. A the goal of the company is to minimize cost given a fixed production goal of 9000 units produced, what meaning of the Lagrange multiplier >? The production function for a company is P = 300x0.75 0.25, where P is the amount produced given x labor and y units of equipment. Each unit of labor costs $900 and each unit of equipment costs $350. A the goal of the company is to maximize production given a fixed budget of $50,000, what is the meaning Lagrange multiplier /?
if investment spending at each level of output increases by $120 billion, what will equilibrium output and income be?
Find Saving rate if :- Average propensity to save = 0.21 Income= $2200

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