Question

The country, Hoosier (a closed economy), has the following data: GDP = 12,000, Consumption = 7,000, Taxes = 3,000, Government purchases = 4,000. The investment is I = 4,000 – 1,000 r (where r is the real interest rate, for example r = 5%, use r = 5.)

a. What is the supply equation?

b. What is the demand equation?

c. What is the equilibrium interest rate, r, and what are national saving and investment, S and I?

Answer #1

Equilibrium Values and Saving
Assume that GDP (Y) is 5,000. Consumption (C) is given by the
equation C = 1,000 + 0.3(Y – T). Investment (I) is given by the
equation I = 1,500 – 50r, where r is the real interest rate in
percent. Taxes (T) are 1,000. Government spending (G) is 1,500.
What are the equilibrium values of C, I, and r?
What are the values of private saving, public saving, and
national saving?
Now assume there is...

Economists in Fundlandia, a closed economy, have collected the
following information about GDP and public savings in their
country:
Y = 1000
G = 100
T = 100
They further estimate that national savings and investment are
governed by the following expressions:
S = 150 + 50*r
I = 600 - 100*r
Where r is the country's real interest rate in % terms (thus if you
find r = 5, then r is 5%).
Problem Set #2 - Part II...

Suppose that in a closed economy GDP is equal to 11,000, taxes
are equal to 2,500, transfer payments are equal to 500, consumption
equals 7,500 and government purchases equal 2,000. What are private
saving, public saving, and national saving?
a. 1,500, 0, and 1500,
respectively
b. 1,000, 500, and 1,500,
respectively
c. 500, 1,500, and 1,000,
respectively
d. None of the above is correct
During the current quarter, a firm
produces consumer goods and adds some of those goods to...

A. Classical/General Equilibrium
Model: Assume that GDP (Y) is 8,500B. Consumption (C) is
given by the equation C = 210B + 0.9(Y – T). Investment (I) is
given by the equation I = 1,200B – 100B(r), where r is the real
rate of interest. Taxes (T) are 400B and government spending (G) is
500B. Show/type your work/calculations!
1. In this economy, compute private savings, public savings, and
national savings (9 points)
Private savings =
Public savings =
...

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?

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...

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...

1. An economy has full-employment output of 5000. Government
purchases are 1000. Desired consumption and desired investment are
given by
Cd= 3600 - 2000r + 0.10Y
Id = 1200 - 4000r
where Y is output and r is the expected real interest rate.
(a) Find the real interest rate that clears the goods market.
Assume that output equals full-employment output.
(b) Calculate the amount of saving, investment, and consumption
in equilibrium.

1. Consider an economy that produces and consumes bread and
automobiles. In the table below are data for two different
years:
Year 2010
Year 2025
Price of an automobile
$50,000
$60,000
Price of a loaf of bread
$10
$20
Number of automobiles produced
100
120
Number of loaves of bread produced
500,000
400,000
Using the year 2010 as the base year, compute the following:
nominal GDP, implicit price deflator and the CPI.
2.
Assume that GDP (Y) is 5,000. Consumption...

1. In a closed economy, suppose GDP equals $21 trillion,
consumption equals $13 trillion, the government spends $7 trillion
and has a budget deficit of $800 billion.
Find government saving, taxes, private saving, national saving,
and investment.
Please show clearly how you calculated your final answers, and
box/circle your final answers (in trillions of dollars) with proper
labels
No credit will be given to an answer in incorrect units, in
notations that differ from what’s used in the lectures, without...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 38 minutes ago

asked 50 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago