Question

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 rate is 5%. Show the autonomous
consumption level and the autonomous expenditure level.

(3) How does a two percentage point decrease in the real
interest rate affect the short-run equilibrium output?

(4) Suppose that the potential output of this economy equals 4800.
Find the short-run equilibrium real interest rate that brings the
economy to full employment.

(5) Suppose Government Revenue T = tY (0< t <1); r stays at
the initial level (5%), Please calculate the multiplier effect of
the government spending increase on the output change (ΔY/ΔG).

Answer #1

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...

An economy is described by the following equation:
C = 1600 + 0.6 (Y - T) - 2000 r
IP = 2500 - 1000 r
G = 2000
T = 1500
C is the consumption, IP is the planned investment, G
is the government spending, T is the net taxes, r is the real
interest rate.
This economy is a closed economy meaning that the Net Exports
are always 0, i.e. NX = 0.
a. Find an equation relating the...

2) Consider the following Keynesian model of the economy.
Consumption Function: C = 12 + .6 Y d,
Investment Function: I = 25 − 50 r,
Government Spending: G = 20,
Tax Collections: T = 20,
Money Demand Function: L d = 2 Y − 200 r,
Money Supply: M = 360,
Price Level: P = 2.
a) Find an expression for the IS curve and plot it.
b) Find an expression for the LM curve and plot it.
c)...

Assume the following equations summarize the structure of an
economy.
C = Ca + 0.7(Y - T)
Ca = 1,000 - 10r
T = 100 + 0.15Y
(M/P)d = 0.3Y - 20r
MS/P = 3,000
Ip = 3,500 - 20r
G = 3,000
NX = 2,000 - 0.4Y
a. Calculate the equilibrium real output (Y) and (r ).
b. Given the above information, compute the new equilibrium real
output if government spending increases by 300.
c. What is the amount...

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)?...

Consider the following economy (with flexible exchange rate
system):
• Desired consumption: Cd = 300 + 0.5Y − 2000r
• Desired investment: Id = 200 − 3000r
• Government purchases: G = 100
• Net export: NX = 350 − 0.1Y − 0.5e
• Real exchange rate: e = 20 + 1000r
• Full employment: Y ̄ = 900.
• Nominal money stock: M = 4354
• Real money demand: L = 0.5Y − 200r
(a) Find the equations for...

If autonomous consumption is $1000, the MPC = 0.75, net taxes =
$500, investment spending = $800, and govt purchases = $500, and NX
= $0, what is equilibrium GDP?
Question 1 options:
$1,800
$1,925
$2,566.70
$7,200
$7,700
Question 2 (1 point)
The focus of the short-run macro model is on the role of
Question 2 options:
spending in explaining economic fluctuations
labor in explaining economic fluctuations
financial markets in explaining economic fluctuations
output in explaining economic fluctuations
resources in...

Consider an economy with no international trade, no government
spending and no taxes, whose consumption function and investment
function are given by the following equations:
C = 100,000 + .92Y I = 40,000
a. What is the equilibrium level of aggregate output for this
economy?
b. What is the saving function for this economy?
c. Check the solution, as we did in class, by showing that at
the equilibrium level of Y total spending exactly matches the level
of output....

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.

Consider the following economy: Planned consumption: ? = 900 +
0.5(? − ?) − 180? Planned investment: ? = 950 − 180? Real money
demand: ( ? ? ) ? = 0.5? − 180?
a. (2 pts) Suppose ? = 400, ? = 450, and ? = 9,750. Find an
equation for the IS curve.
b. (2 pts) Find an equation for the LM curve.
c. (2 pts) Find an equation for the aggregate demand curve.
Express the AD curve...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 5 minutes ago

asked 6 minutes ago

asked 6 minutes ago

asked 7 minutes ago

asked 12 minutes ago

asked 13 minutes ago

asked 16 minutes ago

asked 16 minutes ago

asked 16 minutes ago

asked 16 minutes ago

asked 20 minutes ago