Question 1 Use the following equations to answer the questions below. The Peruvian economy can be characterized by these equations below. C=400+ 0.6Yd Taxes = 600 Equilibrium Output = $4,000 a) Graph the consumption function in the income/output and aggregate expenditures space. Label your horizontal axis income/output (Y) and your vertical axis (AE). Label the vertical intercept and at least one other coordinate on the consumption function. b) What is the sum of investment and government purchases at equilibrium? Show your work. c) What is the equation for aggregate expenditure? Graph the aggregate expenditure function in the same graph from (a). Label the vertical intercept and equilibrium. At equilibrium what is the level of saving in Paru? Show your work On a caporata d

Question 1 Use the following equations to answer the questions below. The Peruvian economy can be characterized by these equations below. C=400+ 0.6Yd Taxes = 600 Equilibrium Output = $4,000 a) Graph the consumption function in the income/output and aggregate expenditures space. Label your horizontal axis income/output (Y) and your vertical axis (AE). Label the vertical intercept and at least one other coordinate on the consumption function. b) What is the sum of investment and government purchases at equilibrium? Show your work. c) What is the equation for aggregate expenditure? Graph the aggregate expenditure function in the same graph from (a). Label the vertical intercept and equilibrium. At equilibrium what is the level of saving in Paru? Show your work On a caporata d

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q1: There are two equations for macroeconomic equilibrium in an economy. State them. Show (mathematically) that Savings equals Investment when expenditure equals income. What type of economy would you have when exports equal imports? What happens to the savings-investment relationship if exports are not equal to imports? [This can be greater than or less than]. [Hint: See video lecture on Open Economy Macroeconomics]. Note: Ensure to write out full meanings when you use abbreviations or short forms. This is key to getting full marks.
TOPIC: Consumption and Saving
In Utopia (a country with substantial excess resources), consumers spend 70% of their incomes and save 30%; the country spends 30% of GDP on imports and the government typically takes 10% of household incomes in taxation.a) What is the value of the multiplier?Last year, the Utopian Government spent 5Bn Utopian Dollars on current expenditure; Utopian households spent 0.5Bn Utopian Dollars in “autonomous consumption” and Utopian enterprises sold goods and services worth 10 Bn Utopian dollars to other countries. Utopian investors spent 15Bn Utopian dollars in maintaining and enhancing the country’s capital equipment.b) What was the value of GDP last year?c) What was the value of the Utopian Government’s budget surplus or deficit last year?d) How would the value of the multiplier (in 2(a) change if Utopia was a closed economy (so zero imports)?e) If the Utopian economy were already at its potential GDP (ie its full -employment GDP), what would happen to the value of the multiplier?
The sub-part a-b was already answered
Suppose that a new free trade agreement allows the economy to import cheaper goods from overseas, thereby decreasing the general price level. Adjust the following graph by either shifting the consumption function curve or the initial point on the consumption function curve (A) to illustrate the impact of a fall in the price level.
Find the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is always $300, net exports (X-IM) are always - 550, government expenditures (G) and taxes (T) are each equal to $400, and the consumption function is described by the following algebraic equation: C = 150 + 0.75Dl DI is disposable income. How much saving (5) is there at the equilibrium level of income. Hint: (1) Dl = Y (national income or GDP) minus taxes (Y-T) (2) Income (Y) not consumed (C) must be saved (S). This means that S = Y-C. (3) to answer this you have to set Y=AE or Y=C+1+G (X-IM), and solve for Y. Then you have to solve for S.
2. Suppose you are economist and have the following data: Consumption; Income; 75 253 85 185 98 212 108 180 118 185 You want to investigate the effect of income on consumption. a)Write and estimate your model b)interpret the results
How would I do g?
3. Suppose that you are interested in answering the question of how consumption reacts to tax increases. In recent years, government has imposed tax increases to fund increased infrastructure spending. If you could design an ideal experiment to answer this question, how would you do so? Do you think it would be practical to use this experiment on a large scale?
QUESTION 8 As a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y- 13250: The function that describes consumption is the same, cd(r) = 5000 – 1000r +0.25Y, but the investment curve shifted to the right: 1d(r) = 550 – 1800r + 0.2Y: This is because firms expect growth to continue in the future and want to invest more. Government spending is also the same: G- 180o0. The world interest rate is 5%. What is Neverland's current account balance? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.
(1) Consumption function: C = 100 + .8Y (2) Planned investment: I = 38 (3) Government spending: G = 75 (4) Exports: EX = 25 (5) Imports: IM = .05 Y4 (6) Disposable income: Y = Y- T (7) Taxes: T= 40 (8) Planned aggregate expenditure: AE = C+I+ G+ EX– IM (9) Definition of equilibrium income: Y = AE
Income Expenditures 0 100 100 150 200 200 300 250 Refer to the table above to answer the following: (a) At an income level of $200, how much is autonomous expenditures and how much is induced? (b) Given the expenditures function AE = $4,000 + 0.6Y and income of $1,000, how much is spent and how much is induced?