For an economy the following functions have been given: C = 100 + 0.8Y S = -100 + 0.2Y I = 120 – 5r Ms = 120 Md = 0.2Y – 5r Calculate the following: 5.1.1. IS equation 5.1.2. LM equation 5.1.3. Equilibrium level of income
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For an economy the following functions have been given:
C = 100 + 0.8Y
S = -100 + 0.2Y
I = 120 – 5r
Ms = 120
Md = 0.2Y – 5r
Calculate the following:
5.1.1. IS equation
5.1.2. LM equation
5.1.3. Equilibrium level of income
5.1.4. Equilibrium level of interest rate.
5.1.5 Calculate National saving.
5.1.6 Calculate money demand
5.1.7 Find consumption
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- Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rc. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving and show a graphical representation of your answer.Y6 4.) The following equations describe an economy. Y = C + I + G C = 50 + 0.7(Y-T) I = 108 -200r G = 120 T = 120 (M/P)d = 2Y -200r M = 1000 P = 1 a.) Use the relevant set of equations to derive the IS curve. Graph it on an appropriately labeled graph. b.) Use the relevant set of equations to derive the LM curve. Graph it on an appropriately labeled graph. c.) What is the equilibrium level of income and the equilibrium real interest rate? d.) Now consider that the LRAS curve is Y = 600. Draw the LRAS curve on the IS-LM Model and the AD-AS Model for this economy. (Remember, P= 1) e.) What will happen for this economy to reach long run equilibrium?1. What are the two major differences between the CPl and the GDP deflator index? (5 marks) 2. Define private saving, public saving, national saving, and investment. How are they related? (5 marks) 3. Give an example of an event that would shift the aggregate-demand curve. Which way would this event shift the curve? (5marks) 4. a. What are the four expenditure components of Gross Domestic Product (GDP)? Explain each of these. (10 marks) B. Define real GDP and nominal GDP. Which is a better measure of economic well-being? (10 marks) 5 a) Explain briefly what the consumer price index measures and how it is constructed. (10 marks) b) Describe the three problems that make the consumer price index an imperfect measure of the cost of living. (10 marks)
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- Graphically illustrate the aggregate consumption and saving functions. Explain these functions with at least 200 words. You may give examples.Suppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, and public saving is 0.2 billion. Assuming the economy is closed, calculate the size of:(i) Consumption (ii) Investment (iii) Government Spending (iv) National Savings b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.Suppose GDP in this country is $1,540 million. Enter the amount for government purchases. National Income Account Value (Millions of dollars) Government Purchases (GG) Taxes minus Transfer Payments (TT) 455 Consumption (CC) 700 Investment (II) 490 Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving = = (t-g, y-t-i, c-t,y-c-t) = = million Public SavingPublic Saving = = (t-g, y-t-i, c-t, y-c-t) = = million Based on your calculations, the government is running a budget (surplus, deficit) .