Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Question
Chapter 26.A, Problem 5TY
(a)
To determine
Calculate the equilibrium level of GDP.
(b)
To determine
Check whether the savings is equal to investment.
(c)
To determine
Calculate the equilibrium level of GDP and savings.
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Students have asked these similar questions
Consumption function for a country; Let C = 100 + 0.75Y. Planned investments 1 = 200. In this case a) Find the
equilibrium national income. b) Find the multiplier coefficient and interpret the meaning it expresses. C) Find
the equilibrium consumption amount. d) Find the equilibrium saving amount. e) How much does the
equilibrium national income change if i 100? f) If C = 0.85, how would the equilibrium national income
change? Explain. g) If C = 0.85, how would the equilibrium saving amount change? Explain
In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true?
A. When consumption increases by RM5, investment increases by a maximum of RM1.
B. When consumption increases by RM5, savings increase by a maximum of RM1.
C. When investment increases by RM1, income increases by a maximum of RM5.
D. When investment increases by RM1, consumption increases by a maximum of RM5.
6. You are given the following data concerning Freedonia, a leg-
endary country:
(1) Consumption function: C = 200 + 0.8Y
(2) Investment function: I = 100
(3) AE = C + I
(4) AE = Y
a. What is the marginal propensity to consume in Freedonia,
and what is the marginal propensity to save?
b. Graph equations (3) and (4) and solve for equilibrium
income.
C. Suppose equation (2) is changed to (2´) I = 110. What is
the new equilibrium level of income? By how much does
the $10 increase in planned investment change equilibrium
income? What is the value of the multiplier?
Chapter 26 Solutions
Economics: Principles and Policy (MindTap Course List)
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