The closed economy model with government is considered. We observe following values of autonomous expenditures: Co = 150, Io = 50, Go = 100, To= 50. Marginal propensity to consume equals 0.8, investment sensitivity parameter equals 5 and income tax rate equals 20%. Using this information find IS curve and derive it graphically.
The closed economy model with government is considered. We observe following values of autonomous expenditures: Co...
Short Run Keynesian Model (30 points) Consider an economy described by the following: autonomous consumption is 300, the marginal propensity to save is 25%, the government runs a balanced budget and also imposes a lump-sum tax of 400 on all consumers. In addition, investment is given by I = 900 + 0.25Y – 100r. The nominal money supply is 1800 and the average price level is 3. Lastly, real money demand is given by L(r,Y) = 0.25Y. a. Derive the...
B,c,d,e please solve Suppose in the economy autonomous consumption - $100, autonomous investmen $120, government purchases G-$400 lump-sum taxes = $70, transfers Tr-$20, exports Er $150 autonomous imports im = $30, marginal propensity to consume mpc = 0.8, proportional income tax rate 1-20%, marginal propensity to invest mpi-0.1, and marginal propensity to imports mpm-0.4 (a) For this economy calculate (i) the amount of autonomous spending: (ii) the value of the spending multiplier; (iii) the equilibrium level of output; (iv) the...
Suppose that investment expenditures increases by $300 billion in a closed and private economy (no government or foreign trade). Assume further that households have a marginal propensity to consume of 75 percent. What will be the final cumulative impact on spending? $900 billion $225 billion $375 billion $525 billion
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity to import 0 autonomous consumption 4 exports 0 private investment 20 income tax rate 0 government expenditures 0 Income consumption investment government aggregate expenditures expenditures 0 10 20 30 40 50 60 70 80 90 How much is consumption when income equals 10
Here are some facts about the economy of Inferior. Marginal propensity to consume 3/5 marginal propensity to import 0 autonomous consumption 4 exports 0 private investment 20 income tax rate 0 government expenditures 0 Income consumption investment government aggregate expenditures expenditures 0 10 20 30 40 50 60 70 80 90 What is equilibrium GDP?
3. (8 points) Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8. Suppose the government cuts taxes by $100 billion while holding government purchases constant. What happens to the following variables? Explain and calculate the amount of change for each variable. a. Public saving (Sg) b. Private saving (Sp): c. National Saving (S): d. Investment (1)
1.Given the following information about a closed economy, what is the level of investment spending and national saving, and what is the budget balance? There are no government transfers. GDP: $1,000 million T=$50 million C=$850 million G=$100 million 2.Given the following information about an open economy, what is the level of investment spending and National savings, and what are the budget balance and net capital inflow? There are no government transfers. GDP: $1,000 million G=$100 million C=$850 million X=$100 million...
Consider the simplest macroeconomic model, with a closed economy and no government. If we assume that desired investment is autonomous with respect to national income, then the investment function (which graphs desired investment against actual national income) will be positively sloped and relatively flat. positively sloped and relatively steep. vertical. negatively sloped. horizontal.
1. In a closed economy to have sustainable output, Aggregate Expenditures are equal toa. Consumptionb. Consumption + Investmentc. Consumption + Investment + Govemmentd. Consumption + Investment + Net Exports2. The calculation 1 /(1-MPC) equalsa. Marginal Propensity to Saveb. Multiplierc. Aggregate Expenditured. Average Consumption3. In a closed economy, when Aggregate Expenditures equal GDP.a. Consumption equals investmentb. Consumption equals aggregate expenditurec. Saving = Planned Investmentd. Disposable income equals consumption minus saving4. Net exports are calculated asa. Importsb. Imports - Exportsc. Exports -...
Question 3 1.5 pts The aggregate demand of an open economy is given by the after-tax domestic consumption C, the investment I (which depends on the interest rater), the government spending G and net exports X-M: AD-C+I+G+X-M=CO+ c1 (1 - t)Y + I(r) +G+X-mY Co is autonomous consumption.c, is the marginal propensity to consume, and m is the marginal propensity to import. In the economy's equilibrium this equals its output: AD - Y. Solving for Y yields: y=(1/(1-c1(1 – t)...