Question

Consider an open economy with the following specifications: C= 200 - 0.85Y T= 300 G= 400...

Consider an open economy with the following specifications:

C= 200 - 0.85Y

T= 300

G= 400

I = 120

X= 40

M= 30

  1. Derive the savings function and show that . MPS + MPC = 1 [3 marks]
  2. Define a budget deficit and state whether the government is in a deficit or surplus.                                                                                                                                                          [3 marks]
  3. Given that the economy is open, state and explain the components of Aggregate demand (AD).                                                                                                                      [4 marks]
  4. Derive the equilibrium income and clearly show the multiplier.                             [10 marks]
  5. What will be the impact on the equilibrium income if investment spending increased by 30%?                                                                                                                         [5 marks]
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
You are given the following income-expenditures model for an economy :    Consumption C = 300...
You are given the following income-expenditures model for an economy :    Consumption C = 300 + .64Yd Tax (T) = $60 Government expenditure G = $100 Investment (I) = $120 From above data calculate the follows: Equilibrium level of income At the equilibrium level of income, what is the amount of consumption? At the equilibrium level of income, what is the amount of savings? Marginal Propensity of Saving (MPS) Tax multiplier in this economy? Budget deficit Unplanned inventory
if you have this data from the american economy C=150=0.80y I= 200 Find the following :...
if you have this data from the american economy C=150=0.80y I= 200 Find the following : 1- The income equilibrium 2- Marginal propensity to consume (MPC), Marginal propensity to save my be expressrd (MPS) , Multiplier 3- find the equilibrium if the income = Planned aggregate expenditure (AE) 4- if the investment increase to be 250 find the effects in income equilibrium 5- Draw this function
Suppose an economy is represented by the following equations. Consumption function C = 300 + 0.8Yd...
Suppose an economy is represented by the following equations. Consumption function C = 300 + 0.8Yd Planned investment I = 400 Government spending G = 500 Exports EX = 200 Imports IM = 0.1Yd Autonomous Taxes T = 500 Marginal Tax Rate t=0.25 Planned aggregate expenditure AE = C + I + G + (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain how multiplier changes when we have an...
The multiplier effect Consider a hypothetical economy where there are no taxes and no foreign trade,...
The multiplier effect Consider a hypothetical economy where there are no taxes and no foreign trade, and households spend $0.90 of each additional dollar they earn and save the remaining $0.10. The marginal propensity to consume (MPC) for this economy is ; the marginal propensity to save (MPS) for this economy is ; and the multiplier for this economy is Suppose investment spending in this economy decreases by $150 billion. The decrease in investment will lead to a decrease in...
Suppose the following aggregate expenditure model describes the US economy: C = 1 + (8/9)Yd T...
Suppose the following aggregate expenditure model describes the US economy: C = 1 + (8/9)Yd T = (1/4)Y I = 2 G = 4 X = 3 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports, all in trillions $US. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium...
The questions below are based on the following information, which relates to the Keynesian model for...
The questions below are based on the following information, which relates to the Keynesian model for an open economy: C = R600 million + 0.75Y Z = R200 million + 0.45Y T = 0.20Y Where: C = Consumption Y = Income Z = Imports T = Tax Additionally: Investment spending = R350 million Government spending = R500 million Exports = R350 million Full employment level of income = 3 000 million. 1.1Calculate the value of the marginal propensity to save....
Suppose the economy of Ansonia is described by the following: C=400+0.6Yd, T=600, G=800, I=500 (a) Calculate...
Suppose the economy of Ansonia is described by the following: C=400+0.6Yd, T=600, G=800, I=500 (a) Calculate the equilibrium level of output. Graph your solution. (b) If the government spending increases by 200 what is the new equilibrium level of output? Use the government spending multiplier. (c) If the government increases taxes by 200 what is the new equilibrium level of output? Use the tax multiplier. (d) If the government increases taxes and spending by 200 what is the new equilibrium...
The US economy is represented by the following equations: Z=C+I+G, C=300+.5YD, YD =Y T T =400,...
The US economy is represented by the following equations: Z=C+I+G, C=300+.5YD, YD =Y T T =400, I =250, G=1000 Given the above variables, calculate the equilibrium level of output. Now assume that consumer confidence increases causing a rise in autonomous consumption (c0) from 300 to 500. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
Calculate Aggregate demand in an economy and establish the level of equilibrium. Calculate the impact on...
Calculate Aggregate demand in an economy and establish the level of equilibrium. Calculate the impact on an economy of an increase investment spending, given a specific multiplier. Explain factors that can change aggregate demand. Calculate AE given the information below and completely fill in the table. There is a practice exercise in Module 7. Please attempt the practice first. Where is equilibrium in this economy based on the table? State the level, don’t just point to it or highlight it....
In an open economy: C = 400 + 0.75Yd T = 0.2Y I = 600 G...
In an open economy: C = 400 + 0.75Yd T = 0.2Y I = 600 G = 1000 X = 500 Z = 0.1Y a.Calculate national income when the economy is at equilibrium. Use the injection-leakage approach to graph your results. b.Full employment is achieved when income is 5500. How much should government expenditure increase to achieve full employment? c.At full employment, what is the (i) budget? (ii) trade balance? d.Based on your answers in (c), is it advisable for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT