Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 20r, c = 0.6; I= 2,450 – 60r; G= 1,980; NX=- 200; T= 1,750. a. Compute the value of the marginal propensity to save. b. Compute the amounts of autonomous planned spending, Ap, when the interest rate equals 0, 2, 4, and 6. c. Compute the equilibrium levels of income when the interest rate equals 0, 2, 4, and 6. Graph the IS curve.

Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 20r, c = 0.6; I= 2,450 – 60r; G= 1,980; NX=- 200; T= 1,750. a. Compute the value of the marginal propensity to save. b. Compute the amounts of autonomous planned spending, Ap, when the interest rate equals 0, 2, 4, and 6. c. Compute the equilibrium levels of income when the interest rate equals 0, 2, 4, and 6. Graph the IS curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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