Question

An economy is described by the following equations: C = 100 + 0.75(Y – T) IP...

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)?

Assume that the economy is NOT in equilibrium, and the level of output is Y=1,200. Should firms increase or decrease production in order to move towards the equilibrium?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
An economy is described by the following equation: C = 1600 + 0.6 (Y - T)...
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...
Here is another set of equations describing an economy: C = 14,400 + 0.5(Y-T) – 40,000r...
Here is another set of equations describing an economy: C = 14,400 + 0.5(Y-T) – 40,000r IP = 8000 – 20,000r G = 7000 NX = -1,800 T = 8000 Y* = 40,000 a. Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate. [i.e. write down the PAE equation] b. At what value should the Fed set the real interest rate to eliminate any output gap? (Hint: Set output Y equal to the...
Assume the following equations summarize the structure of an economy. C = Ca + 0.7(Y -...
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 = c0+ c1YD YD= Y – T...
An economy is described by the following equations: C = c0+ c1YD YD= Y – T I = b0+ b1Y G = G (autonomous) T = T (autonomous) Suppose that consumers decide to consume less (and therefore save more) for any given amount of disposable income. Specifically, assume that consumer confidence (c1)falls. What will happen to output, investment, public saving and consumption?
An economy is described by the following equations: C = 1,500 + 0.9 (Y – T)...
An economy is described by the following equations: C = 1,500 + 0.9 (Y – T) I p = 1000 G = 1,500 NX = 100 T = 1,500 Y* = 8,800 The multiplier for this economy is 10. Find the effect on short-run equilibrium output of: a. An increase in government purchases by 100 from 1,500 to 1,600. Instruction: Enter your response as an integer value. Short-run equilibrium output will increase to . b. A decrease in tax collections...
If a small economy can be described by the following equations: C = 50 + 0.75...
If a small economy can be described by the following equations: C = 50 + 0.75 (Y − T) I = 180 − 15r NX =200−50ℇ M/P =Y - 40r T =200 G=200 M = 3000 P = 3 r ∗ =6 a. Derive and graph the specific IS *and LM* curves for this economy. b. Calculate the equilibrium exchange rate, level of income, and net exports. c. Assume a floating exchange rate. Calculate what happens to the exchange rate,...
Consider an economy in the short-run described by the following equations: Z = C + I...
Consider an economy in the short-run described by the following equations: Z = C + I + G G = 500 T = 500 C = 250 + 0.75(Y – T) I = 625 a. What is the equilibrium condition that allows us to solve for Y. Find Y. Compute private saving, public saving and total/national saving at this level of Y. b. What is the value of the marginal propensity to consume? What is the value of the expenditure...
An economy is initially described by the following equations: C = 500 + 0.75(Y - T);...
An economy is initially described by the following equations: C = 500 + 0.75(Y - T); I = 1000 - 50r; M/P = Y - 200r; G = 1000; T = 1000; M = 6000; P = 2; where Y is income, C is consumption, I is investment, G is government spending, T is taxes, r is the real interest rate, M is the money supply, and P is the price level. a. Derive the IS equation and the LM...
1. Suppose the United States economy is represented by the following equations: Z= C + I...
1. Suppose the United States economy is represented by the following equations: Z= C + I + G , C = 500 + 0.5Yd, Yd = Y − T T = 600, I = 300, G = 2000, Where, Z is demand for goods and services, Yd is disposable income, T is taxes, I is investment and G is government spending. Y is income/production. (a) Assume that the economy is in equilibrium. What does it mean in terms of the...
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?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT