Consider an economy in which all taxes are autonomous and the following values of autonomous consumption, planned investment, government expenditure, autonomous taxes, and the marginal propensity to consume are given: Ca = 1,400; Ip = 1,800; G = 1,950; Ta = 1,750; c = 0.6 a. What is the level of consumption when the level of income (Y) equals $10,000? b.What is the level of saving when the level of income (Y) equals $10,000? c. What is the level of planned investment when the level of income (Y) equals $10,000? What is the level of actual investment? What is the level of unintended inventory investment? d. Show that injections equal leakages when income (Y) equals $10,000. e.Is the economy in equilibrium when income (Y) = $10,000? If not, what is the equilibrium level of income for the economy described in this question?

Consider an economy in which all taxes are autonomous and the following values of autonomous consumption, planned investment, government expenditure, autonomous taxes, and the marginal propensity to consume are given: Ca = 1,400; Ip = 1,800; G = 1,950; Ta = 1,750; c = 0.6 a. What is the level of consumption when the level of income (Y) equals $10,000? b.What is the level of saving when the level of income (Y) equals $10,000? c. What is the level of planned investment when the level of income (Y) equals $10,000? What is the level of actual investment? What is the level of unintended inventory investment? d. Show that injections equal leakages when income (Y) equals $10,000. e.Is the economy in equilibrium when income (Y) = $10,000? If not, what is the equilibrium level of income for the economy described in this question?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The consumption function macroeconomics is often written as C= a + b(Y-T) where b expresses: a. The marginal savings rate b. The marginal propensity to consume c. The interest rate that maximizes consumption d. The relationship between tax and consumption
B) In a closed economy, the functions for consumption, investment, government expenditure and taxation are given as below (in RM million). Consumption function : C=500 + 0.75 Yd Investment function | = 800 Government expenditure :G = 400 Тахation :T= 200 + 0.2 Y i. Find the equilibrium level of national income for the economy stated above. ii. Draw a graph to show the equilibrium of national income by using AD=AS approach. Find the total value of taxation when the national income is at equilibrium. iii.
4
Find the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is always $300, net exports (X-IM) are always - 550, government expenditures (G) and taxes (T) are each equal to $400, and the consumption function is described by the following algebraic equation: C = 150 + 0.75Dl DI is disposable income. How much saving (5) is there at the equilibrium level of income. Hint: (1) Dl = Y (national income or GDP) minus taxes (Y-T) (2) Income (Y) not consumed (C) must be saved (S). This means that S = Y-C. (3) to answer this you have to set Y=AE or Y=C+1+G (X-IM), and solve for Y. Then you have to solve for S.
5. Graphing the saving and consumption functions from MPC Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.5. That is, if disposable income increases by $1, consumption increases by 50¢. Suppose further that last year, disposable income in the economy was $300 billion and consumption was $250 billion. Based on these data, use the blue line (circle symbols) to plot this economy's consumption function on the following graph. REAL CONSUMER SPENDING (Billions of dollars) 700 600 500 400 300 200 100 0 Aa Aa -100 Consumption Fn. O O 0 100 200 300 400 500 600 700 800 REAL DISPOSABLE INCOME (Billions of dollars) Help Clear All Suppose that this year, disposable income is projected to be $340 billion. Based on your analysis, you would expect consumption to be and saving to be
A9
If autonomous consumption is 400 and the multiplier is 4, the saving function is equal to * S= 400 +4Yd S= -400 + 0.75Yd S= 400 +0.1Yd S= -400+0.25Y. Suppose disposable income increases from $7 trillion to $8 trillion. At the same time, consumption expenditure increases from $6.8 trillion to Thus the MPC must equal $7.8 trillion; 0.60 $7.6 trillion; 0.80 $7.4 trillion; 0.40 $8 trillion; 1.00
3. If the consumption function is C= $200 billion + 0.9Y, a) How much do consumers spend with income of $3 trillion? b) How much do they save?
Assume a closed economy in which, there is no government. If autonomous consumption is80, autonomous investment is 70, and marginal propensity to save is 0.25 in this economy.Then calculate the amount of equilibrium output (income)?
Determine a) the value of GDP and b) the value of the multiplier in a closed economy, if the saving function is S = -20 + 0.2Y, investment is 50, and government expenditures are 40
The private consumption of Macroland is given by C=500+0.75Y and the private investment function is given by I=400−1000r, where r is the interest rate and Y is the GDP. The planned aggregate expenditure can therefore be written as PE=C+I=900+0.75Y−1000r. The equilibrium in the goods and services market happens when the planned expenditure is equal to the actual expenditure, or PE=Y Find the equilibrium GDP by solving the system of equations PE=900+0.75Y-1000r PE= Y for Y and PE. Note your solutions will depend on r! 1. Plot your solution for Y in a diagram measuring Y on the horizontal axis and r on the vertical axis. This curve is called the IS curve.
Which of the following statements is correct? The saving function and the consumption function have the same slope. The consumption function is the same in the short and in the long run. Disposable income does not affect the level of savings. The steeper the consumption function, the flatter the saving function.