Question

In a simple closed economy where there is no government and investment, the consumption function of...

In a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. What is the expenditure multiplier in this economy?

Select one:

a. 0.40

b. 1.66

c. 2.5

d. 0.60

e. None of the other four choices

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

the correct option for the given problem is OPTION-C

we can solve this problem as follow-

STEP -1-

  • the consumption function comprises of inception (a) and MPC (b)
  • the formula for expenditure multiplier is same as investment multiplier.

MPC implies marginal propensity to consume.

STEP-2

STEP-3

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
n a simple closed economy where there is no government and investment, the consumption function of...
n a simple closed economy where there is no government and investment, the consumption function of households is given by C(Y)=60+0.6Y. The potential output in this economy at 450. a. What is the consumption expenditure when income is equal to zero? b.  What is the break-even point Y? c. By how much will equilibrium income change due to the addition of investment?   d. Suppose, now our simple closed economy added an intended investment I=100, the consumption function of households is still...
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure...
In a closed economy, without the government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000. If the population of the economy is 200, the per capita national income is: A. $10. B. $17. C. $35. D. $50. In a closed economy without the government, income equals: A. aggregate consumption. B. aggregate savings. C. aggregate savings plus aggregate investment. D. aggregate savings plus aggregate consumption. The savings rate designates: A. the fraction of income that households save. B....
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.
The consumption function for a closed economy with a government sector is: C = $2 trillion...
The consumption function for a closed economy with a government sector is: C = $2 trillion + .6Yd, where Yd = disposable income = Y – T, and                         T = lump sum taxes = $2 trillion Additionally, planned investment, I, is $1.5 trillion and government spending G, is             $2.5 trillion. Find Y* (equilibrium GDP). Find C and S. Find the size of the multiplier. Assume the Y* you found above is below the full employment level of Y,...
In a closed economy, the consumption function is: c = 1.15 + 0.75(y - t) billions...
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...
The MPC for a closed economy is 0.75. Autonomous consumption is $500, investment is $300, and...
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?
A small closed economy have the following characteristics consumption function=0.9y+100 planned investment=$460 government spending=$400 taxes=$0 1.The...
A small closed economy have the following characteristics consumption function=0.9y+100 planned investment=$460 government spending=$400 taxes=$0 1.The equation of the aggregate expenditures line is: * a.AE = 0.9 Y + 560 b.AE = 0.9 Y + 460 c.AE = 0.9 Y + 960 d.AE = 0.9 Y + 160 2.The government spending multiplier is: * a,1 b.0.1 c.10 d.0.01 3.The slope of the aggregate expenditures curve of this economy is: a.100 b.460 c.400 d.0.9 4.The Equilibrium is: a.Y = 9,600 b.Y...
Which of the following statements is/are true in a closed economy with government where consumers save...
Which of the following statements is/are true in a closed economy with government where consumers save a part of their disposable income? Select one: a. The expenditure multiplier is always between 0 and 1. b. The expenditure multiplier is always greater than 1. c. The expenditure multiplier can vary from 0 to a number greater than 1. d. None of the other answers are correct. e. The expenditure multiplier is always less than the tax multiplier.
Suppose that the economy is characterized by the consumption function C=151+ 0.1(Y-T) with exogenous investment I...
Suppose that the economy is characterized by the consumption function C=151+ 0.1(Y-T) with exogenous investment I = 10, government purchases G = 20, and taxes T = 10. Which of the following is true? the multiplier is 0.9 the equilibrium consumption/output ratio is C/Y = 0.9 the autonomous spending is 170. equilibrium output is Y = 200 the government budget is balanced
The economy of Beverly Hills has a consumption function of C = 10 + 0.8Y, investment...
The economy of Beverly Hills has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y. 1) Refer to Fact 27.5.1. What is the equation for the aggregate expenditure curve for this economy? A) AE = 16 + 0.7Y B) AE = 36 - 0.7Y C) AE = 26 + 0.8Y D) AE = 36 + 0.9Y E) AE =...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT