Question

Honduras is a small open economy (an open economy is an economy that trades with other countries). Suppose Honduras imposes a strict limit on the number of imports entering Honduras. As a result in the fall of imports the ________ will ________ and equilibrium output will ________.

Group of answer choices:

- 45-degree line; shift downward; increase

- 45-degree line; shift downward; decrease

- 45-degree line; shift upward; increase

- 45-degree line; shift upward; decrease

- planned expenditure curve (E); shift downward; increase

-planned expenditure curve (E); shift downward; decrease

- planned expenditure curve (E); shift upward; increase

- planned expenditure curve (E); shift upward; decrease

2)

Suppose the aggregate output of the Danish economy is
characterized as follows.

Consumption: C = 85 + 0.8(Y-T)

Investment: I = 200

Government: G = 275

Taxes: T = 200

Net Exports: NX = -50

Given the information, the equilibrium level of CONSUMPTION (C) in
Denmark is ____ .

Given the information, the equilibrium level of output in Denmark is ____ .

Given the information, national savings in Denmark is ____ .

Given the information, the marginal propensity to consume (mpc) in Denmark is ____ .

Answer #1

1. As a result of fall in import the planned expenditure line will shifts upward and the equilibrium output increases.

Explanation: equilibrium is given at the intersection of 45°line and aggregate expenditure line. As with fall in import NX increases it shifts the expenditure line up and hence equilibrium shifts from e° to e1.

2.

C= 1325

Y= 1750

S=425 and MPC = 0.8

Recall that in an open economy Y = C + I + G + NX, where
Net Exports NX = EX - IM.
Suppose a country's exports EX are
independent of (unrelated to) its national income Y, but its
imports IM tend to increase whenever
Y increases.
a. Briefly explain why imports might
behave in this manner.
b.
Given these assumptions draw each of the following curves as a
function of Y
on a
separate...

An increase in the price level, other things equal, will shift
the _____.
consumption, investment, and net exports schedules of the
aggregate expenditures model downward
consumption, investment, and net exports schedules of the
aggregate expenditures model upward
consumption and investment schedules of the aggregate
expenditures model upward, but the net exports schedule
downward
consumption and net exports schedules of the aggregate
expenditures model upward, but the investment schedule
downward
The foreign purchases, interest rate, and real-balances effects
explain why the...

Suppose an economy is represented by the following
equations.
Consumption function C = 300 + 0.8Yd
Planned investment I = 400
Government spending G = 500
Exports EX = 200
Imports IM = 0.1Yd
Autonomous Taxes T = 500
Marginal Tax Rate t=0.25
Planned aggregate expenditure AE = C + I + G + (EX - IM)
By using the above information calculate the equilibrium level of
income for this economy and explain how multiplier changes when we
have an...

3) Which of the
following occurs as the economy moves leftward along a given IS
curve?
A) An increase in the
interest rate causes investment spending to decrease.
B) An increase in the
interest rate causes money demand to increase.
C) An increase in the
interest rate causes a reduction in the money supply.
D) A reduction in
government spending causes a reduction in demand for goods.
E) An increase in taxes
causes a reduction in demand for goods.
5)...

An economy is described by the following equations:
C = 100 + 0.75(Y – T)
IP = 50
G = 150
NX = 20
T = 40
What is the marginal propensity to consume (MPC) in this
economy?
Find the autonomous expenditure (the part of PAE that does not
depend on Y)
What is the equilibrium level of output?
Assume that the economy is NOT in equilibrium, and the level of
output is Y=1,200. How much is planned spending (PAE)?...

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...

3. The components of planned aggregate spending in a certain
economy are given by Consumption Function: C = 800 + 0.75(Y - T) –
2000r
Planned Investment: Ip = 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...

Income
(Yd)
Consumption
Expenditure
Saving
Investment
Expenditure
Government
Expenditure
Net Export
Expenditure
Aggregate
Expenditure
$8000
$11,000
$2,500
$5,000
$12,500
12,000
14,000
2,500
5,000
12,500
20,000
20,000
2,500
5,000
12,500
30,000
27,500
2,500
5,000
12,500
50,000
42,500
2,500
5,000
12,500
100,000
80,000
2,500
5,000
12,500
Calculate savings, MPC, MPS, break even income, and the
equilibrium level of income (Y = AE = C + I + G +NX) in the above
given information.
Draw a graph showing disposable income (Yd)...

For the following economy, find autonomous expenditure, the
multiplier, short-run equilibrium output, and the output gap. By
how much would autonomous expenditure have to change to eliminate
the output gap?
C
= 450 + 0.75 (Y – T )
I p
= 200
G
= 140
NX
= 60
T
= 100
Y*
= 3,200
Instructions: Enter your responses as absolute
numbers.
Autonomous expenditure:
Multiplier:
Short-run equilibrium output:
There is (Click to select) a
recessionary an
expansionary no output gap in the...

In an open keynesian economy, the domestic households’
consumption Cpl = 100 + 0,75Yd, investment I = 400, the net tax
rate t = 0,2, government expenditure on goods and services G = 300,
exports X = 200, and the marginal propensity to import MPI =
0,1.
a) Calculate the equilibrium output in this economy.
b) Demonstrate whether leakages equal injections to the circular
flow.

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