Question

The answer is here. Could you please explain question 19 and how was that 110 comes out? Thanks.

Question 18 Question 20: In this question, interest rate and prices are held fixed, and the economy can be described by the income-expenditure model C 11000.6YD; IPlanned 300 500i, Consumption: Planned investment: where YD disposable income where i = 0.04 (i.e., 4% & it is held fixed) Таxes: T 280 Transfers Government spending: TR 100 G 160 Question 18 Compute for the equilibrium level of national savings. Be sure to show your work and keep your answer to 2 decimal places if necessary. C 1100 0.6(Y - 280 100) 992 0.6Y _ (992 + 0.6Y) + (300-500 х 0.04) + 160 AEplanned АEPamned lan 1432 0.6Y Equilibrium: 1432 0.6Y = Y Y* 3580 SNational 3580- (992 0.6 x 3580) 160 280 National savings: Output: 3580 280 Question 19 The economy is initially in its equilibrium consumer confidence; whether autonomous consumption rises or falls as shown in Question 18. Suppose there is a fall in result, autonomous consumption changes by 10%. You need to determine as a In the diagram to the left, show the effect of AEplanned AEplanned Y this change in consumer confidence. Be sure to identify the new equilibrium 0 AE Planned Immediately after the change in consumer AE Planned confidence index, firms find their inventories RISES (rises/falls) unexpectedly Immediately after the change in consumer confidence index, the level of unplanned 45° 110 Y investment is equal to Y*.0 Y*.I

Answer 1

onfidumce Fall in the lowYumer Index, eonsumery denand le of aggregate utput (uu thy danthaue enovgh dmfidsnu in ue eunamy and's marlet functiènings rewlt they deerease thair autononous guding by lo Althovgh the autonomous eonsinption deureases by 10, Mha plauned expenditure pendling rewan Aalktret t unaltered at 3580 unik, beause, it was hue actval expenditure it that Hime n te connnptian equaton, e = 11o0 0. 6YD, 1100 i Hhe aułonamous naumption part, whoreas 0-6D dey refer to the part of Lonseuphion that is dapevektd deyéndlant Disposalble ineme Y-T TR). Now, Hhe autonomou dipasaldle income + swumiphion art of canunphion redluca by 10 'redu s y 10 of 00(110) Actval Expendhure vnder thit new Urumutana 4470 Thus, Planned Ependiture Achval Bxpenditure

Thi's mplies tuat the stock of And itinreases by 10 of inuentories increases 1100, .e, J0 units Inerease in Hhe stock of inuentories aud rice in he leuel of t unplannad in uestmant Hhe same meana Yaing