Provide two labelled diagrams with supporting calculations showing AS/AD and NS/NAF to illustrate how prices and real GDP and savings respond to this change. Show equilibrium yo, y1 and y2. Ignore long run conciderations
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- 6. When households opt to increase savings; consumption decreases from Co = 240 + 0.9YD to C = 140 + 0.9YD. Assume AS = 2p, I = 100, R = 100 + 0.1y, G = 50 and NX = 200 – 0.01Y – 0.1p. а. Provide two labelled diagrams with supporting calculations showing AS/AD and NS/NAF to illustrate how prices and real GDP and savings respond to this change. Show equilibrium y0, y1 and y2. Ignore long run considerations. b. Explain whether or not this example exhibits a Paradox of Thrift.5. Consider the following is the economy of Country Z: C = 200 + 0.85Y I= 100 Answer the following questions: (a) Calculate the equilibrium level of output algebraically using the saving-investment (S-I) approach. (b) What is the value of saving at the equilibrium output from part (a)? (c) Suppose the investment increases to 200. What is the new equilibrium level ot output? Calculate the value using the multiplier approach.ADVANCED ANALYSIS Suppose that the linear equation for consumption in a hypothetical economy is C = 60 + 0.75Y. Also suppose that income (Y) is $600. Determine the following values: Instructions: For parts a, b, d, and f, round your answers to 2 decimal places if necessary. For parts c and e, enter your answers as a whole number. а. MPC %3 b. MPS = c. Level of consumption = $ d. APC e. Level of saving = $ f. APS =
- 1. According to the Bureau of Economic Analysis, during therecession of 2007–2009, household saving as a fraction of dis-posable personal income increased from a low of just over1 percent in the first quarter of 2008 to 5 percent in the secondquarter of 2009. All else equal, what impact would this changein saving have on the MPC, MPS, and multiplier? How wouldthis change affect equilibrium output when planned invest-ment changes? 2. Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.5. Consider the following is the economy of Country Z: C = 200 + 0.85Y I = 100 Answer the following questions: (a) Calculate the equilibrium level of output algebraically using the saving-investment (S-I) approach. (b) What is the value of saving at the equilibrium output from part (a)? (c) Suppose the investment increases to 200. What is the new equilibrium level of output? Calculate the value using the multiplier approach.1. Given the following on a closed economy.C = 40 + 0.8Yd C= consumptionI = 55 – 200r I= InvestmentG = 20 G = government spendingT = 20 T = TaxesYe = 400 Ye = National Income r = rate of interestDetermine the following:-The equilibrium level of consumption-The level of investment-The level of interest rate-The level of Private savings-The level of Public savings-The level of national savings
- 1. Complete the accompanying table with disposable income (DI) and consumption (C) schedules for a private, closed economy. All figures are in billions of dollars. DI Consumption Saving АРС APS MPC MPS 8. 40 40 80 72 120 104 160 136 200 168 240 200 (a) Refer to the above data. If plotted on a graph, the slope of the consumption schedule would be: (b) The break-even level of income is ($ ) where saving equals ( $ :). Households dissave ( $ ). Dissaving occurs at the lowest levels of income as households spend ( more, less ) than they receive in disposable income. This dissaving could occur with households liquidating (selling for cash) their assets or borrowing money. As income rises we see that savings ( increases, decreases ) by a greater and greater amount. (c) If consumption increases by $10 billion at each level of disposable income, the average propensity to consume (APC) will ( change, unchange) and/but the marginal propensity to consume (MPC)will ( change, not change). (d) (APC,…100 gaia 270 200 130 60 450 100 200 300 Aggregate income (Y) Figure 8.3 ?Refer to Figure 8.3. Which of the following statements is true „Aggregate saving is negative for all income levels below $400 a O For all aggregate income levels above $200, aggregate consumption is greater than aggregate income b O If consumption is the only expenditure, this economy would be in equilibrium at an aggregate income level of c O $300 Saving is negative at all income levels below $200 d O Aggregate consumption (C)Table 27-1 Y= C+I+G C= 500 + 0.8(Y – T) I = 300 G = 700 T= 0.25Y Table 27-1 Y= C+I+G C= 500 + 0.8(Y-T) I = 300 G = 700 T= 0.25Y Refer to Table 27-1. What is the level of consumption in this model? О а. 2,150 O b. 2,750 c. 2,350 O d. 2,950 O e. 2,550
- ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 60 + 08Y Assume further that planned investment lo government spending G, and net exports X are independent of the level of real GDP nd constant at lg 40, G= 0, and Xp= 10. Recall also that, in equilibrium, the real output produced () is equal to aggregate expenditures: Y= C+lg+ G+ Xp Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy S 1050 b. What happens to equilibrium Yif lg changes to 20? 950 What does this outcome reveal about the size of the multiplier? Multiplier=5) Mrs. Gizem has a salary of 10000 TL per month. Assuming that her autonomous (zero-income level) consumption is 600 TL and her MPC is 0.72, find how much she spends in one month and how much she saves? b) If Mrs. Gizem receives a salary rise of 2000 which increases her monthly salary to 12 000 per month; how much increase we may expect in her consumption and her saving?ADVANCED ANALYSIS Suppose that the linear equation for consumption in a hypothetical economy is C=60 + 0.75Y Also suppose that income (Y is $600. Determine the following values: Instructions: For parts a, b, d, and f, round your answers to 2 decimal places if necessary. For parts c and e, enter your answers as a whole number. a. MPC = b. MPS = c. Level of consumption = $ d. APC= e. Level of saving = $ %3D f. APS %3D