Question

In a closed economy the consumption function is

In a closed economy the consumption function is

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The functional relationship between C and Y is called consumption function. It helps us to understand how C behaves with respect to Y. Also, it helps us to estimate C corresponding to different values of Y in the economy.

Algebraically, consumption function is expressed as in the following equation: C = c + bY.

c in this equation refers to the minimum level of consumption. It is the value of consumption when Y = 0. The parameter b refers to the rate at which C Increases in response to an increase in Y. It is the marginal propensity to Consume. Y is the income.

NOTE: I HOPE YOU WILL BE SATISFIED WITH MY ANSWER PLEASE DO PROVIDE RATING. THANK YOU AND HAVE A NICE DAY. :))

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
n a simple closed economy where there is no government and investment, the consumption function of...
n a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. a. What is the consumption expenditure when income is equal to zero? b.  What is the break-even point Y? c. By how much will equilibrium income change due to the addition of investment?   d. Suppose, now our simple closed economy added an intended investment I=100, the consumption function of households is still...
In a simple closed economy where there is no government and investment, the consumption function of...
In a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. What is the expenditure multiplier in this economy? Select one: a. 0.40 b. 1.66 c. 2.5 d. 0.60 e. None of the other four choices
Suppose that in a closed economy with a state sector the following relations apply: Consumption function:...
Suppose that in a closed economy with a state sector the following relations apply: Consumption function: ? = 125 + 0.75?? where ?? = ? - ? Desirable investment: ? = 30 Government spending: ? = 50 Taxes: ? = 15 A. Find the equilibrium income, the available equilibrium income and the equilibrium consumption. B. Find and interpret investment and tax multipliers. C. Calculate the savings function under the assumption that the economy is in equilibrium as well as the...
In a closed economy, given the following: The consumption function C = 0.8(1 – 0.25) Y...
In a closed economy, given the following: The consumption function C = 0.8(1 – 0.25) Y + 12           The average tax rate t = 25% The level of private investment I = 26 The level of government spending G = 14 Where Y is the national income. Calculate the equilibrium level of income and output in the economy. Calculate the expenditure multiplier and show the effect of an increase in government spending and an increase in private investment.
In a closed economy, the consumption function is: c = 1.15 + 0.75(y - t) billions...
In a closed economy, the consumption function is: c = 1.15 + 0.75(y - t) billions of 1992 dollars. The tax function is: t = 0.1y + 0.1 billions of 1992 dollars. Planned investment is $1 billion and planned government expenditures are $1.5 billion. Calculate: The equilibrium level of real GDP. 2. Consumer expenditure 3. Saving 4. The investment multiplier 5. The government budget deficit 6. The leakages from and injections into the circular flow of income and expenditure. Do...
The MPC for a closed economy is 0.75. Autonomous consumption is $500, investment is $300, and...
The MPC for a closed economy is 0.75. Autonomous consumption is $500, investment is $300, and government spending is $400. a) What is the equilibrium level of real GDP? b) If business increases planned investment expenditure by 300 to 400, what is the new equilibrium real GDP? c) What is the slope of the AE function in this economy and the value of the multiplier?
The consumption function for a closed economy with a government sector is: C = $2 trillion...
The consumption function for a closed economy with a government sector is: C = $2 trillion + .6Yd, where Yd = disposable income = Y – T, and                         T = lump sum taxes = $2 trillion Additionally, planned investment, I, is $1.5 trillion and government spending G, is             $2.5 trillion. Find Y* (equilibrium GDP). Find C and S. Find the size of the multiplier. Assume the Y* you found above is below the full employment level of Y,...
Suppose that in a closed economy with a public sector the following relations apply: Consumption function:...
Suppose that in a closed economy with a public sector the following relations apply: Consumption function: C = 200 + 0.60Yd where (Υd = Y –T) Desirable investment: Ιp = 400 - 560r Government expenditure: G = 250 Taxes: Τ = 50 Real money demand for transactions: 0.5Y Real money demand for speculation: 600 - 2200r Nominal amount of money: M = 1000 Price level: P = 1.25 A. Find the equilibrium in the commodity market (IS curve). B. Find...
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure...
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000. If the population of the economy is 200, the per capita national income is: A. $10. B. $17. C. $35. D. $50. In a closed economy without the government, income equals: A. aggregate consumption. B. aggregate savings. C. aggregate savings plus aggregate investment. D. aggregate savings plus aggregate consumption. The savings rate designates: A. the fraction of income that households save. B....
On Sun Island, a closed economy, the consumption function is c = 1 + 0.75(y -...
On Sun Island, a closed economy, the consumption function is c = 1 + 0.75(y - t) billions of 1992 dollars. The government of Sun Island levies taxes of $1 billion a year and buys goods and services worth $1 billion a year. Investment on Sun Island is $0.5 billion a year. 5. If investment increases by $0.25 billion a year, what is the change in real GDP? (3 points) 6. Go back to the initial equilibrium level of GDP....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT