Q6: If the Marginal Propensity to save (MPS) is the following function of income:1S'(Y)= 0.1– 0. 2 Y2,= 0. 1and if the aggregate saving S is nil when income Y is 70, find the Savingfunction S( Y).1Q7: Suppose that the net investment flow is described by the equation I(t) = 6t7,and that the initial capital stock, at time t= 0, is K(0). What is the time path of capitalК?1Q8: If I(t)= 3000t7 (thousands of dollars per year) -a nonconstant flow- whatwill be the capital formation during the time interval [1, 4], i. e. during the second,third, and fourth years?

[Since more than 1 question are posted, only 1st one is answered as per policy] (Question 6)…

Q6: If the Marginal Propensity to save (MPS) is the following function of income: S'(Y) = 0.1– 0. 2r, 0. 2 Y2, and if the aggregate saving S is nil when income Y is 70, find the Saving function S( Y).

Q6: If the Marginal Propensity to save (MPS) is the following function of income: S'(Y) = 0.1– 0. 2r, 0. 2 Y2, and if the aggregate saving S is nil when income Y is 70, find the Saving function S( Y).

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

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal: less investment will be forthcoming when r rises. r will fall as more investment is undertaken. more investment will be forthcoming when i exceeds r. r will exceed i at all possible levels of investment.
Individual retirement accounts (IRAS) were established by the U.S. government to encourage saving. An individual who deposits part of current earnings in an IRA does not have to pay income taxes on the earnings deposited, nor are any income taxes charged on the interest earned by the funds in the IRA. However, when the funds are withdrawn from the IRA, the full amount withdrawn is treated as income and is taxed at the individual's current income tax rate. In contrast, an individual depositing in a non-IRA account has to pay income taxes on the funds deposited and on interest earned in each year but does not have to pay taxes on withdrawals from the account. Another feature of IRAs that is different from a standard savings account is that funds deposited in an IRA cannot be withdrawn prior to retirement, except upon payment of a substantial penalty. a. Sarah, who is five years from retirement, receives a $10,000 bonus at work. She is trying to decide whether to save this extra income in…
Assume that the long-run level of output is Y=1000Y=1000, which the economy is also at initially in the short-run. Suppose that the consumption and investment functions are, respectivley, C=100+0.8(Y−T¯),I=100−2000r,C=100+0.8(Y−T¯),I=100−2000r, that is, MPC is 0.8. Furthermore, the LM (money market equilibrium) curve is M¯P=Y200i.M¯P=Y200i. The government is currently implementing a policy G¯=80,T¯=50G¯=80,T¯=50, and the central bank (CB) is supplying M¯=1000M¯=1000. Expected inflation is πe=0πe=0. Derive the IS curve. It should be written in the form Y=A−BiY=A−Bi, that is, you only need to solve for the values of A=A=Answer and B=B=Answer.
Consider an economy that is composed of identical individuals who live for two periods. These individuals have preferences over consumption in periods 1 and 2 given by U = /(C,) + (C2). They receive an income of 45 in period 1 and an income of 20 in period 2. They can save as much of their income as they like in bank accounts, earning an interest rate of 10% per period. They do not care about their children, so they spend all their money before the end of period 2. Each individual's lifetime budget constraint is given by C1 + C2/(1 + r) = Y1 + Y2/(1 + r). Individuals choose consumption in each period by maximizing lifetime utility subject to this lifetime budget constraint. (a) What is the individual's optimal consumption in each period? How much saving does he or she do in the first period? (b) The government has decided to set up a social security system. This system will take $10 from each individual in the first period, put it in the bank, and transfer it to each person with…
Can you please explain what to do with p1=10 and p2=5
Mary has income of $2000 today and $1000 tomorrow. She can lend and borrow at an interest rate of 20%. There is 10% inflation. Her preferences for intertemporal consumption are represented by the following utility function u(c, c) = min{c1, 2c2} (a) What is her optimal consumption bundle?
Assume that the production function for a country is given by Y=√K and annual investment is given by the function I=γ×YI where γ=0.280, and that the yearly depreciation rate is 4.67%. Suppose that this year, the output in the country is 1, and a neighbor country's output is 50% higher. Calculate the time it would take for the country's output to catch up with its neighbor's output. Assume the neighbor country's economy is neither growing nor shrinking.
The Montag Family purchased a house in 2020 and expects its value (in thousands of dollars) t years in the future will be well-modeled by the function V(t)=310(1.08). By what percentage does the model predict the house will increase in value each year?
Consider the following functions for consumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000. Compute private, public, and national savings for this economy, and find the equilibrium real interest rate (r). Assume that G declines by 500 units. How will it change your answers in part (a)? What happens to the national savings, given everything else, if the public decides to consume less out of their disposable income (assume that the propensity of consume falls by 10 percent)? Given your answer in part (c), what happens to investment and real interest rate? Answer all four.
For an economy where: C= 75 + 0.7Y |= 125 a) Solve for Y". Include your calculations. b) Draw the AE-Y graph for the economy. Include the intercept and slope of the AE function. c) On your graph from part (b), demonstrate the change that would occur if businesses increase their investment due to a change in interest rates.
Consider a two-period consumption saving model and let ci and c2 denote the first and second period consumption, respectively. Assume that the interest rate at which the consumer may lend or borrow is 10%. Suppose that a consumer's utility function is u (C1, c2) = c1 + 20 c2. The consumer first period income is I1 = $100 and the present value of her income stream is $330. (a) What is the optimal consumption stream (consumption bundle) of this consumer? (b) Is this consumer borrower or lender? How much does she borrow or lend? (c) What is the effect of a reduction of the interest rate to 5% on the consumer's optimal first-period saving? (Make sure to take into account the effect of the decline in the interest rate on the present value of the consumer's income stream.)
Our closed economy has a production function Y = A•F(K,LxE), where Y, K, L, E & A all have their usual meanings as per our lectures & course textbook. Also, this production function exhibits all the usual mathematical/economic properties we usually assume: positive marginal products, diminishing marginal products, complementarity between K & (LxE), and constant returns to scale. The aggregate consumption function depends negatively on the real interest rate, the government budget is balanced initially & the economy is in both a long-run equilibrium and steady state initially. The population growth rate is 2% per year, capital depreciates at a rate of 3% per year, the saving rate is 25% and technology is constant. Suppose the level of labour effectiveness (E) suddenly permanently rises by 10%. a) Use the long-run classical model to determine the qualitative impact of this shock on the long-run equilibrium levels of real output, consumption, investment, real interest…