Question

A. Classical/General Equilibrium Model: Assume that GDP (Y) is 8,500B. Consumption (C) is given by the...

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 =

            National savings =

2. Find the equilibrium real interest rate, r. Prove that r satisfies the income identity Y = C + I + G. (16 points)

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
Equilibrium Values and Saving Assume that GDP (Y) is 5,000. Consumption (C) is given by the...
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...
Assume that the world works according to the Classical model. In a small open economy, output...
Assume that the world works according to the Classical model. In a small open economy, output is produced according to a Cobb-Douglas production function, consumption is equal to C=40+0.6(Y-T) and the investment function is I=280-10r. You know that the output produced is Y=900, government spending is G=150, taxes are T=90 and that the world real interest rate is 4% (r*=4). In all the questions below, make sure to explain your answers and show all your work. a. Compute: i. Private...
Consider the following economy Y = C + I + G Y = 5,000 G =...
Consider the following economy Y = C + I + G Y = 5,000 G = 1000 T = 1000 C= 250 + 0.75(Y-T) I = 1000 – 50r Compute private savings, public savings and national savings. Find the equilibrium interest rate. Suppose G rises to 1,250. Compute private savings, public savings, national savings and the interest rate. Explain intuitively why these variables have changed
Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation...
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, 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.
Economists in Fundlandia, a closed economy, have collected the following information about GDP and public savings...
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...
MACROECONOMICS given: Crowding out with algebra. Consider an economy described by the following model. Y =...
MACROECONOMICS given: Crowding out with algebra. Consider an economy described by the following model. Y = K1/3L2/3 K = 1000; L = 1000 G = 100 T = 100 C = 250 + 0.5(Y-T) I = 600 – 100r i. Calculate the equilibrium real interest rate, national saving, public saving, private saving, consumption, output, and investment. List your numbers out like this: Y = 1000 r = 4 S = 200 Spub = 0 Spriv = 200 C = 700...
Assume that the consumption function is given by C = 200 + 0.5(Y – T) and...
Assume that the consumption function is given by C = 200 + 0.5(Y – T) and the investment function is I = 1,000 – 200r, where r is measured in percent, G equals 300, and T equals 200. A. What is the numerical formula for the IS curve? (Hint: Substitute for C, I, and G in the equation Y = C + I + G and then write an equation for Y as a function of r or r as...
Assume that the consumption function is given by C = 100 + 0.5(Y – T) and...
Assume that the consumption function is given by C = 100 + 0.5(Y – T) and the investment function is I = 1,000 – 100r, where r is measured in percent, G equals 200, and T equals 100. a. What is the numerical formula for the IS curve? (Hint: Substitute for C, I, and G in the equation Y = C + I + G and then write an equation for Y as a function of r or r as...
The components of planned aggregate spending in a certain economy are given by Consumption Function: C...
The components of planned aggregate spending in a certain economy are given by Consumption Function: C = 800 + 0.75(Y - T) – 2000r Planned Investment: I p = 400–3000r Government Revenue and Spending: T = 300 and G = 450 Net Export: NX = 75 where r is the real interest rate (For example, r = 0.01 means that the real interest rate is 1 percent). (1) Find the level of public saving. (2) Suppose that the real interest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT