Question

NATIONAL INCOME

The 2019 Zambian economy shows that the autonomous consumption
expenditure is K185 million and the marginal propensity to save is
0.25. Investment function (I)=150+0.125y-10i, government
expenditure is K100 million, and net taxes are K80 million. The
report shows that investment, government expenditure and taxes are
constant. The Central Bank indicated that the money markets are
influenced by the money demand function M^d=300+Y-10i and money
supply function M^s=350+90i. The statistics show that Zambian
economy was not trading with the rest of the world.

Find the equilibrium aggregate expenditure *

Your answer

Find the equilibrium interest rates *

Your answer

state Zambia’s autonomous aggregate expenditure *

Your answer

Determine the size of the multiplier *

Your answer

MPC for the economy *

Your answer

What is Zambia’s aggregate consumption when real GDP is K1100 million? *

Your answer

What is Zambia’s planned investment when real GDP is K1500 million? *

Your answer

Answer #1

(1)

MPS = 0.25, so MPC = 1 - MPS = 1 - 0.25 = 0.75

In goods market equilibrium, Y = AE = C + I + G

Y = 185 + 0.75(Y - 80) + 150 + 0.125Y - 10i + 100

Y = 435 + 0.75Y - 60 + 0.125Y - 10i

(1 - 0.75 - 0.125)Y = 375 - 10i

0.125Y = 375 - 10i

Y = 3,000 - 80i..........(IS curve)

In money market equilibrium, Md = Ms

300 + Y - 10i = 350 + 90i

Y = 50 + 100i...........(LM curve)

Setting IS = LM,

3,000 - 80i = 50 + 100i

180i = 2,950

**i = 16.39**

**Y (equilibrium AE) =** 50 + 100 x 16.39 = 500 +
1,639 = **2,139**

(2)

**Autonomous aggregate expenditure =** 435 - 60 -
10i = 375 - 10 x 16.39 = 375 - 163.9 = **211.1**

(3)

**Multiplier =** 1 / MPS = 1 / 0.25 =
**4**

(4)

**MPC = 0.75**

(5)

When Y = 1100, **C =** 185 + 0.75(1100 - 80) = 185
+ 0.75 x 1020 = 185 + 765 = **950**

(6)

When Y = 1500, C = 185 + 0.75(1500 - 80) = 185 + 0.75 x 1420 = 185 + 1065 = 1,250

**I =** Y - C - G = 1500 - 1250 - 100 =
**150**

in the economy of coconut island, autonomous counsumption
expenditure is $50 million, and the marginal propensity to consume
is 0.8. Investment is $160 million, government expenditure is $190
million, and net taxes are $250 million. Investment, government
purchases, and taxes are constant-they do not vary with income. The
island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve
b) What is the equilibrium real GDP for Coconut Island?
c) What is the size of...

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?

In an economy with no exports and imports, autonomous
consumption is $2 trillion, the marginal propensity to consume is
0.6, investment is $5 trillion, and government expenditure on
goods and services is $6 trillion. Taxes are $4 trillion and do
not vary with real GDP. If real GDP is $33.1, calculate
disposable income, consumption expenditure, and aggregate planned
expenditure. What is equilibrium expenditure?
The author got the equilibrium expenditure is $26.5 trillion
but the expert got 25. Please break down...

QUESTION 2
The following table shows the equilibrium level of a three-sector
economy.
National Income Taxes Disposable Income Consumption Savings
Investment Government Expenditure Aggregate Expenditure
100 50
200 125
300 200
400 275
500 350
600 425
700 500
800 575
Given:
Investment = RM25 million
Government expenditure= RM100 million
Taxes = RM100 million
a) Complete the table
b) Derive the consumption function and saving function
c) Calculate the equilibrium income level
d) Sketch the equilibrium income using the aggregate...

Suppose that you have the following information for an
economy:
Marginal propensity to consume - MPC
0.80
Autonomous consumption - A
$500
Planned investment - PI
$600
Net exports - NX
-$400
Government spending - G
$300
You will need this information for the questions that
follow.
Part 1:
When real GDP is equal to $4,500, aggregate expenditure is equal
to $ .
Part 2:
When real GDP is equal to $5,000, aggregate expenditure is equal
to $ .
Part 3:
When real GDP...

If the slope of the consumption function is 0.8, and there is no
income tax or imports, what is the multiplier?
Select one:
a. 0.80
b. 1.25
c. 0.56
d. 5
In the table below shows the aggregate expenditure schedule for
a simple economy. What is autonomous expenditure for this
economy?
Real GDP
Aggregate Expenditure
0
100
100
175
200
250
300
325
400
400
500
475

28-
If autonomous spending rises,
the expenditure equilibrium will rise by the increase in
autonomous spending.
the expenditure equilibrium will increase by the level of GDP
times the expenditure multiplier.
the expenditure equilibrium will fall by the increase in
autonomous spending.
the expenditure equilibrium will rise by the increase in
autonomous spending multiplied by the expenditure multiplier.
31-
An example of fiscal policy is
an increase in autonomous spending by consumers.
an increase in social security spending by the elderly....

Assume the following economy: Autonomous Consumption = £10,000;
Marginal Propensity to Consume = 0.8; Business Investment = £30,000
A. Find the equilibrium size of income Y and the size of the
Multiplier of Business Investment (hint: to find the Multiplier
increase investment by 10,000) (5%) B. Assume now that a government
sector is introduced, while business investment is still £30,000.
Government spending injects £50,000 into the economy. However, in
order to finance its expenditure the government levies an income
tax...

1.Suppose that for a particular economy and period, investment
was equal to RM 200 billion, government expenditure was equals to
100, net taxes[TA] were fixed at 150 and consumption was
represented by below function C= 20+0.6YD
a. What is the level of equilibrium income?
b. What is the value of government expenditure multiplier?
c. What is the value of the tax multiplier?
d. If investment decline by RM100 billion, what will be the new
equilibrium
2.Assume investment = 100, government...

Assume the following values: Marginal Propensity to
Consume b = 0.8; Autonomous Consumption a = 200; Investment
Spending I = 250. There is no government spending.
a) For a consumption function C = a + bY, what is the
equilibrium value for income Y in the economy? (The value at which
planned aggregate expenditure and planned output coincide.)
b) What changes when Investment Spending increases to 300? When
it drops to 225?
c) What effect can you observe in the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 10 minutes ago

asked 10 minutes ago

asked 14 minutes ago

asked 22 minutes ago

asked 23 minutes ago

asked 25 minutes ago

asked 31 minutes ago

asked 31 minutes ago

asked 47 minutes ago

asked 47 minutes ago

asked 50 minutes ago

asked 54 minutes ago