Question

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

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

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 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 +
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 + .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 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 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 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 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 = 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 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 =...

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