Homework Answers
The anwer is a) An increase in investment and a decrease in private saving
This is because as output is constant and money supply is increasing the interest rate in market will fall. Hence people will demand more money and reduce their saving. Also an increase in tax with the same output means government will actively try to use the revenue and increase spending to compensate for the lack of output. Along with this due to low interest rates it is ideal for the economic agents to indulge in investment activities and boost investment spending.
Assume that GDP (Y) IS 5,000. Consumption (C) is given by the equation C-1,200+0.5(Y-T)-50r, where r...
Assume that GDP (Y) IS 5,000. Consumption (C) is given by the equation C-1,200+0.5(Y-T)-50r, where r is the real interest rate in percentage. Investment (I) is given by the equation I=1,500-50r. Taxes (T) are 1,200 and government spending (G) is 1,500. 1) What are the equilibrium values of C, I, and r? 2) What are the values of private saving, public saving, and national saving?
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co...
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co decrease and government spending is unchanged a consumption and investment both increase b. consumption and investment both decrease c consumption increases and investment decreases d. consumption decreases and investment increases. 7. Suppose a business-friendly billionaire becomes president. As a result, businesses become optimistic about the future and more eager than before to increase their investment spending According to the classical long-run macroeconomic model of...
Short Answer Questions 1 Assume thatGDP (nis 6,000. Consumption (C) isgiven by the equation d=600 T)....
Short Answer Questions 1 Assume thatGDP (nis 6,000. Consumption (C) isgiven by the equation d=600 T). Investment rhisgi +0.60 equation / 2,000- 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending G) is also 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. If government spending rises to 1,000, what are the new equilibrium...
4. (12 points) Assume that GDP (Y) is 5000. Consumption (C) is given by the equation...
4. (12 points) Assume that GDP (Y) is 5000. Consumption (C) is given by the equation C = 1200 + 0.3(Y – T) – 50r, where r is the real interest rate, in percent. Investment (I) is given by the equation I = 1500 – 50r. Taxes (T) are 1000, and government spending (G) is 1500. (a) What are the equilibrium values of C, I, and r? Show your work! (Hint: You need to use 3 equations in order to...
Assume a simple model of the US economy with no international trade. Suppose the government, in...
Assume a simple model of the US economy with no international trade. Suppose the government, in an effort to stimulate the economy, increases its spending on goods and services without changing taxes. Using the model of the market for loanable funds, show how this policy will affect the levels of saving, investment, consumption, and total output in the long run. Explain your answers carefully Suppose the government did not change its level of spending but decreased taxes instead. Show how...
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T)....
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T). Fill in the columns in the table: PLANNED PLANNED UNPLANNED NET DISPOSABLE CONSUMPTION INVESTMENT GOVERNMENT AGGREGATE INVENTORY OUTPUT TAXES INCOME SPENDING SAVING SPENDING PURCHASES EXPENDITURES CHANGE 1,050 50 150 200 1,550 50 200 2,050 50 150 200 150 Use your answers in the previous problem to answer the following questions: 1) How much of an increase in spending would be required to generate an...
1. Given the following data, answer all questions Y 5000 G-1000 T 1000 C-250+0.75 (Y-T 1000-50...
1. Given the following data, answer all questions Y 5000 G-1000 T 1000 C-250+0.75 (Y-T 1000-50 a. Calculate: Consumption Private Saving Public Saving- National Saving Investment- b. Calculate the equilibrium interest rate:r c. Assume G increases to 1,250. Calculate: Consumption Private Saving- Public Saving National Saving- d. Calculate the new equilibrium interest rate: Now open the economy to NX: NX 500-500 E Investment- e. Calculate: Consumption Private Saving = Public Saving- National Saving Investment- The trade balance- Equilibrium exchange rate-...
2. The country, Hoosier (a closed economy), has the following data: GDP: Y = 1200, Consumption:...
2. The country, Hoosier (a closed economy), has the following data: GDP: Y = 1200, Consumption: C=600 - 10,000 r, Taxes: T = 200, Government purchases: G=300. The investment is I = 700 - 10,000 a. Use the information above to find the supply and demand equations for loanable funds: (i) Supply equation: 360 + 10,000+ sex theri um ii. Demand equation: 300 - 10.000 equat to b. What is the equilibrium interest rate, r, and what are national saving...
i understand why a decrease in tax will increaseconsumotion but i dont understand why a future...
i understand why a decrease in tax will increaseconsumotion
but i dont understand why a future tax raise will also increase
consumption.
in this case, does ricardian equivalence hold? thank you
6:41 PM Wed Oct 30 TODO+ Xaxes) may be advantageous because 54% + 8 0 A) it discourages credit-constrained consumers from borrowing too much. B) it increases the welfare of credit-constrained consumers. C) it eliminates the problems that cause credit market imperfections. D) it encourages more private savings. E)...
s. (2 PTS) Assume the following closed economy model: C-350+0,7 (Y 1 300 + 0,04%-30i G=330...
s. (2 PTS) Assume the following closed economy model: C-350+0,7 (Y 1 300 + 0,04%-30i G=330 ; T . 400 + 0.1Y (MP)"-1,4%. 60i M-4.610;P-2 Where C consumption, I- investment, Y- income, i-interest rate (in percentage ponts, 6, 7, 8 . .), О . government spending; (MP), demand for real balances, Me money supply a) Compute the equilbrium levels for income, the interest rate, consumption investment and the budget balance b) Suppose the goal of the govermnment is to increase...
of a closed economy. when 6. According to the classical long-run macroeconomic model of a co decrease and government spending is unchanged a consumption and investment both increase b. consumption and investment both decrease c consumption increases and investment decreases d. consumption decreases and investment increases. 7. Suppose a business-friendly billionaire becomes president. As a result, businesses become optimistic about the future and more eager than before to increase their investment spending According to the classical long-run macroeconomic model of...
Short Answer Questions 1 Assume thatGDP (nis 6,000. Consumption (C) isgiven by the equation d=600 T). Investment rhisgi +0.60 equation / 2,000- 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending G) is also 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. If government spending rises to 1,000, what are the new equilibrium...
4. (12 points) Assume that GDP (Y) is 5000. Consumption (C) is given by the equation C = 1200 + 0.3(Y – T) – 50r, where r is the real interest rate, in percent. Investment (I) is given by the equation I = 1500 – 50r. Taxes (T) are 1000, and government spending (G) is 1500. (a) What are the equilibrium values of C, I, and r? Show your work! (Hint: You need to use 3 equations in order to...
For the data in the following table, the consumption function is C = 150 + 0.6(Y-T). Fill in the columns in the table: PLANNED PLANNED UNPLANNED NET DISPOSABLE CONSUMPTION INVESTMENT GOVERNMENT AGGREGATE INVENTORY OUTPUT TAXES INCOME SPENDING SAVING SPENDING PURCHASES EXPENDITURES CHANGE 1,050 50 150 200 1,550 50 200 2,050 50 150 200 150 Use your answers in the previous problem to answer the following questions: 1) How much of an increase in spending would be required to generate an...
1. Given the following data, answer all questions Y 5000 G-1000 T 1000 C-250+0.75 (Y-T 1000-50 a. Calculate: Consumption Private Saving Public Saving- National Saving Investment- b. Calculate the equilibrium interest rate:r c. Assume G increases to 1,250. Calculate: Consumption Private Saving- Public Saving National Saving- d. Calculate the new equilibrium interest rate: Now open the economy to NX: NX 500-500 E Investment- e. Calculate: Consumption Private Saving = Public Saving- National Saving Investment- The trade balance- Equilibrium exchange rate-...
2. The country, Hoosier (a closed economy), has the following data: GDP: Y = 1200, Consumption: C=600 - 10,000 r, Taxes: T = 200, Government purchases: G=300. The investment is I = 700 - 10,000 a. Use the information above to find the supply and demand equations for loanable funds: (i) Supply equation: 360 + 10,000+ sex theri um ii. Demand equation: 300 - 10.000 equat to b. What is the equilibrium interest rate, r, and what are national saving...
i understand why a decrease in tax will increaseconsumotion
but i dont understand why a future tax raise will also increase
consumption.
in this case, does ricardian equivalence hold? thank you
6:41 PM Wed Oct 30 TODO+ Xaxes) may be advantageous because 54% + 8 0 A) it discourages credit-constrained consumers from borrowing too much. B) it increases the welfare of credit-constrained consumers. C) it eliminates the problems that cause credit market imperfections. D) it encourages more private savings. E)...
s. (2 PTS) Assume the following closed economy model: C-350+0,7 (Y 1 300 + 0,04%-30i G=330 ; T . 400 + 0.1Y (MP)"-1,4%. 60i M-4.610;P-2 Where C consumption, I- investment, Y- income, i-interest rate (in percentage ponts, 6, 7, 8 . .), О . government spending; (MP), demand for real balances, Me money supply a) Compute the equilbrium levels for income, the interest rate, consumption investment and the budget balance b) Suppose the goal of the govermnment is to increase...
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