In a closed economy, desired consumption is Cd=2000+0.9Y- 100,000r-T, and desired investment is Id = 1000-45,000r. Real money demand is Md/P-Y-6000i. Other variables are ne-0.03, G=500, Y= 1000, and M-2100. The government runs a balanced budget. The equilibrium values of the real interest rate, consumption, investment, and the price level are Or-0.04333, C=418.7, I-85.6, P = 2.3 Or-0.05, C = 400, 1-100, P-3 Or-0.02, C-400, 1-100, P=3 Or=0.01, C=420, 1 = 110, P=2
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- The economy of country B is characterized by the following: • Aggregate output: Y • Investment spending: I= 80 • Government spending: G= 90 • Net taxation: T= - 10 + 0.1Y • Disposable income: Y=Y -T • Consumption function: C= 30 +0.9Yd The equilibrium output for this economy is 1100 Round off your answer to two decimal places. If the marginal propensity to save (MPS) increases to 0.15, the equilibrium output will be Round off your answer to two decimal places.Saving function = S=- 500 + 0.25 Y, I = 400 - 1250 i Ms = 1200, Mt = 0.20 Y, Mp = 0.05 Y and Msp = 500 - 1300 i a) Calculate Y and i equilibrium b) If the government increase its expenditure by 100, what is the rate of national income growth and how many percent the effectiveness of this policy? c)Draw the graph completely.Answer the following questions: 1. Suppose consumption C = 50 + 0.80 (YD), Government Purchases G = 50, Export X = 20, inflation rate is 2.5%. The net tax rate, t = 0.25. The marginal propensity to !3! %3D import, m = 0.2. What level of Investment is needed to achieve a target equilibrium income of 400? 2. Suppose GDP in a closed economy is equal to $100 million, Consumption is $50 million and the government's net tax rate is 10%. If we are told that the government has a budget deficit of $10 million, calculate government purchases A- BI T EEE E # Fr
- a. Suppose the government increases both taxes (7) and government purchases (G) by equal amounts. Assuming income (Y) is fixed by the factors of production, the change in national saving (AS) will be (MPC-1) * AT. (1-MPC) x AT. b. The larger is the MPC (the closer it is to 1), the will be the increase in the interest rate. will be the decline in investment, and theAssume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by the equationC = 1,200 + 0.6(Y −T)−100r, where r is the real interest rate, in percent. Investment (I) is givenby the equation I = 2,000 − 200r. Taxes (T) are 1,000, and government spending (G) is 1,500.(a) What are the equilibrium values of C, I, and r? (b) What are the values of private saving, public saving, and national saving? (c) For the given consumption function, what does the relationship between consumption and theinterest rate imply about the saving schedule?Trace out the effect of increase in government expenditure on equilibrium output and the interest rate when government finance its expenditure through (a) open market operation, (b) increase in tax rate.
- onsider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y – T). Planned investment is 300, as are government spending and taxes. What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the equation Y = C + I + G and then solve for Y.) What are equilibrium consumption, private saving, public saving, and national saving?If, Autonomous Private Final Consumption Expenditure = $ 13,500, Exports = $ 5000 Government Final Consumption Expenditure = $ 6800 Government Investment Expenditure = $ 8900 Marginal Propensity to Import = 0.1, Marginal Propensity to Save = 0.25, Tax rate = 20% If Government increases its Investment Expenditure by $ 12,000, what is Marginal Propensity to Consume?ime left 1:1629 wing questions: 1. Suppose consumption C = 50 + 0.80 (YD), Government Purchases G = 50, Export X= 20, inflation rate is 2.5%. The net tax rate, t = 0.25. The marginal propernsity to import, m = 0.2. What level of Investment is needed to achieve a target equilibrium income of 400? 2. Suppose GDP in a closed economy is equal to $100 million, Consumption is $50 million and the government's net tax rate is 10%. If we are told that the government has a budget deficit of $10 million, calculate government purchases
- A closed economy has income Y of 1200, consumption C of 800, government purchases G of 200, and taxes T of 150. Investment is determined by the equation I = 300 – 20r. a. Calculate national saving. National saving = 200 b. Calculate public saving. Public saving = -50 c. Calculate private saving. Private saving = 250 d. Calculate equilibrium interest rate. Equilibrium interest rate = e. If the government increases its purchases to 240, what is the new equilibrium interest rate? New equilibrium interest rate =Consider a frugal closed economy without money market. Assume there is no government or exports/imports. The economy is described by the following set of equations. C =1000+0.5⋅Y ID = 600 1. What is the marginal propensity to save of this economy? a) 0.4 b) 0.5 c) 0.1 d) 0.3 e) 0.2 Currently, the economy is saving a half of the amount it consumes. The level of unplanned inventory change is [0, 600, 200, 1400 , 2000 ] and the economy is [equilllibrium or not at equillibrium,]The government decreases current taxes, while holding government spending in the present and the future constant. Using diagrams, determine the equilibrium effects on consumption, investment, the real interest rate, aggregate output, employment, and the real wage. What is the multiplier, and how does it differ from the government expenditure multiplier? Now suppose that there are credit market imperfections in the market for consumer credit, for example due to asymmetric information in the credit market. Repeat part (a), and explain any differences in your answers in parts (a) and (b)