Question

1) In the Keynesian cross, assume that the consumption function is given by

C=200+0.75 (Y-T)

Planned investment is 100; government purchases and taxes are both 100.

- Graph planned expenditure as a function of income.
- What is the equilibrium level of income?
- If government purchases increase to 125 (goes up by 25), what is the new equilibrium income?

Answer #1

1. In the Keynesian cross, assume that the consumption function
is given by: C=$85+0.7(Y−T). Planned investment is $200, government
purchases and taxes are both $50.
a. Graph planned expenditure as a fraction of income.
b. What is the equilibrium level of income?
c. If government purchases increase to $65, what is the new
equilibrium income?
d. What level of government purchases is needed to achieve an
income of 1160? Assume taxes remain at $50.
e. What level of taxes is...

1. In the Keynesian cross, assume that the consumption function
is given by: C=$85+0.7(Y−T). Planned investment is $200, government
purchases and taxes are both $50.
a. Graph planned expenditure as a fraction of income.
b. What is the equilibrium level of income?
c. If government purchases increase to $65, what is the new
equilibrium income?
d. What level of government purchases is needed to achieve an
income of 1160? Assume taxes remain at $50.
e. What level of taxes is...

In the Keynesian cross model, assume that the consumption
function is given by C=120+0.8(Y−T).
Planned investment is 200; government purchases and taxes are
both 400. Y, C, I G&T are all in billions.
1. Graph planned expenditure as a function of income.
2. What is equilibrium income?
3. If government purchases increase to 420, what is the new
equilibrium income? What is the multiplier for government
purchases?
4. What level of government purchases is needed to achieve an
income of...

Suppose you are developing a Keynesian Cross Model with the
following information:
C = 220+(0.75(Y-T), Planned Investment I = 500, G = T= 500
a.
Please find out the equilibrium income.
b.
Please find out what is the consumption at the equilibrium
level.
c.
Please graph the Keynesian Model to locate the equilibrium
between the income and
expenditure.
d.
What level of government purchase is required to achieve an
income level of $ 3700?
e.
What is the mpc for...

In the Keynesian Cross, assume that the consumption function is
given by: C = 200 + 0.8 (Y-T).
Assume that: I = I ̅= 100, G = G̅ =100, T = T̅ =100.
a) Use graphical analysis to demonstrate the determination of
equilibrium income.
b) What is the equilibrium level of income?
c) If government spending increase to 125, what is the new
equilibrium income?
d) Now instead of assuming T = T̅ , assume that T = T̅ +...

Assume that the consumption function is given by C = 200 +
0.75(Y ? T). Government purchases and taxes are both 100. Planned
investment is derived as follows: there are many ideas, whose cost
of implementation are all 3. Ideas are indexed by j > 0. Idea j
produces j units of return next year. Index j follows an
exponential distribution on (0, ?) with density 100e ?j , j > 0.
Derive the IS curve.

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...

In A country the consumption function is: C (Y) = 5 +
0.75 Y
The investments are I = 4;
full employment income is YV = 40.
a) How high must government expenditure be for full employment
to be achieved?
b) How high would government transfers to A-land citizens have to
be to achieve the same goal? (Note: a transfer is like a negative
tax, -T)
c) Why is it that the state expenditure is higher for b) than for...

Consider a closed economy to which the Keynesian-cross analysis
applies. Consumption is given by the equation C = 200 + MPC(Y – T).
Planned investment (I) is 300, government spending (G) is 300 and
taxes (T) is 300. Assume MPC is equal to 2/3.
(a) If Y is 1,500, what is planned spending? What is inventory
accumulation or decumulation? Is equilibrium Y higher or lower than
1,500?
(b) What is equilibrium Y?
(1 mark)
(c) What are equilibrium consumption, private...

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....

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