Question

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.

  1. What are the equilibrium values of C, I, and r?

  2. What are the values of private saving, public saving, and national saving?

  3. Now assume there is a technological innovation that makes business want to invest more. It raises the investment equation to I = 2,000 – 50r. What are the new equilibrium values of C, I, and r?

  4. What are the new values of private saving, public saving, and national saving?

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
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 =            ...
1. Consider an economy that produces and consumes bread and automobiles. In the table below are...
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...
Y = 5,000 C = 1,000 + 0.3(Y - T) I = 1,500 - 50r T...
Y = 5,000 C = 1,000 + 0.3(Y - T) I = 1,500 - 50r T = 1,000 G = 1,500 where Y is total income (GDP), G is government spending, C is aggregate consumption, I is the investment function, T is government taxes and r is the real interest rates in percent. b. Jupiter Island is a small open economy (with perfect capital mobility) in the world economy described above, though not involved in the technological innovation. Use the...
Consider an economy with the given equations. Y = C + I + G + NX...
Consider an economy with the given equations. Y = C + I + G + NX Y=$5500 G=$1100 T=$1200 C=$200+0.60(Y−T) I=1100−50r NX=1270−1270? r=r*=5 b. Suppose now that G rises to $1400. Solve for private saving, public saving, national saving, investment, the trade balance, and the equilibrium exchange rate. Public savings = $_____ National savings = $____ Investment = $_____ Net exports (trade balance) = $____ Exchange rate _____ c. Suppose that the world interest rate rises from 5 to 12...
Consider an economy described by the following equations: Y=C+I+G+NX, Y=8,000 G=2,500 T=2,000 C=500 + 0.75(Y−T) I=900−50r...
Consider an economy described by the following equations: Y=C+I+G+NX, Y=8,000 G=2,500 T=2,000 C=500 + 0.75(Y−T) I=900−50r NX=1,500−250ϵ r=r∗=8. a. In this economy, solve for private saving, public saving, national saving, investment, the trade balance, and the equilibrium exchange rate. b. Suppose now that G is cut to 2,000. Solve for private saving, public saving, national saving, investment, the trade balance, and the equilibrium exchange rate. Explain what you find. c. Now suppose that the world interest rate falls from 8...
a. Consider the following long-run model: Real GDP (Y) = 2,000; Consumption (C) = 300 +...
a. Consider the following long-run model: Real GDP (Y) = 2,000; Consumption (C) = 300 + 0.6 (Y-T); Investment (I) = 500 -30r where r is the real interest rate; Taxes (T) = 450; Government spending (G) = 400. i. Compute consumption, private savings, public savings, national savings, investment and the real interest rate. ii. Using the same model, except now C= 200 + 0.6(Y-T). Compute consumption, private savings, public savings, national savings, investment and the real interest rate. iii....
Assume the following model of the economy, with the price level fixed at 1.0: C =...
Assume the following model of the economy, with the price level fixed at 1.0: C = 0.6(Y – T) T = 40 I = 120 – 30r G = 40 Y = C + I + G Ms/P = Md/P = 2Y – 50r Ms = 280 Write a numerical formula for the IS curve, showing Y as a function of r alone. (Hint: Substitute out C, I, G, and T.) Write a numerical formula for the LM curve, showing...
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...
Assume the following model of the economy, with the price level fixed at 1.0: C =...
Assume the following model of the economy, with the price level fixed at 1.0: C = 0.8(Y – T) T = 1,000 I = 800 – 20r G = 1,000 Y = C + I + G Ms/P = Md/P = 0.4Y – 40r Ms = 1,200 a. Write a numerical formula for the IS curve, showing Y as a function of r alone. b. Write a numerical formula for the LM curve, showing Y as a function of r...
Y = C + I + G + NX Y = 18,500; G = 4,000; T...
Y = C + I + G + NX Y = 18,500; G = 4,000; T = 2,000 C = 750 + 3/4 (Y - T) I = 1,000 - 50r CF = 750 - 25r NX = 1,825 - 150ϵϵ The world interest rate increases to r* = 10. Solve for consumption, private and public saving, national saving, investment, the trade balance, the net capital outflow (net foreign investment), the domestic real interest rate, and the real exchange rate....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT