if, C= 120 + 0.9Y, YD= Y + TR - T, T= 100 + 0.1Y, I= 500, G= 600, TR= 200, X= 700 and IM= 300 + 0.2Y a) What is the value of marginal propensity to save? 1. b) What is the value of the autonomous expenditure multiplier? 2. c) Calculate the value of equilibrium level of real GDP? 3. d) Suppose that the full-employment level of GDP is $5000m. State the type of output gap persistent in this economy and calculate its size.

if, C= 120 + 0.9Y, YD= Y + TR - T, T= 100 + 0.1Y, I= 500, G= 600, TR= 200, X= 700 and IM= 300 + 0.2Y a) What is the value of marginal propensity to save? 1. b) What is the value of the autonomous expenditure multiplier? 2. c) Calculate the value of equilibrium level of real GDP? 3. d) Suppose that the full-employment level of GDP is $5000m. State the type of output gap persistent in this economy and calculate its size.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter9: The Keynesian Model In Action

Section: Chapter Questions

Problem 11SQ

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Consider an economy that is characterised by the following set of equations: C = co + C1YD Yp Y - T I bo + bịY %3D Government spending (G) and taxes (T) are constant. Note that investment () is proportional to output (Y). a) Solve for equilibrium output. b) Using your answer derived in (a) identify and discuss the multiplier. How does the relation between investment and output affect the value of the multiplier?
As the marginal propensity to consume (MPC) increases, As the marginal propensity to save (MPS) increases, the multiplier the multiplier remains the same. remains the same. decreases. decreases. increases. increases. If the marginal propensity to consume is 0.40, what is the multiplier, assuming there are no taxes or imports? Round to the tenths place. Given the multiplier that you calculated, by how much will gross domestic product (GDP) increase when there is a $1,000 increase in government spending? Give your answer to the nearest whole number. %24
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= 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Q.2.1 Calculate the level of autonomous spending in this economy.(2)Q.2.2Calculate the size of the multiplier(Note: Round your answer to two decimal places)(4)Q.2.3Calculate the equilibrium level of income (Hint: use the multiplier method)(2)© The Independent Institute of Education (Pty) Ltd 2020Page 6 of 10 202020Q.2.4Q.2.5Q.2.6Question 3Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
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