Consider the following model of the economy: C = c0 + c1YD T = t0 + t1Y Assume G is exogenous. Assume investment depends only on Y. I = b0 + b1Y (a) Solve for equilibrium output. Express equilibrium output in the form of a multiplier times the autonomous
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Consider the following model of the economy: C = c0 + c1YD T = t0 + t1Y Assume G is exogenous. Assume investment depends only on Y. I = b0 + b1Y (a) Solve for equilibrium output. Express equilibrium output in the form of a multiplier times the autonomous
4. Consider the following model of the economy: C=c0+c1Yd ; T=t0+t1Y; and Yd= Y G and...
4. Consider the following model of the economy: C=c0+c1Yd ; T=t0+t1Y; and Yd= Y G and I are both constant. (a) Is t1 greater than or less than one? Explain. (b) Solve for the equilibrium output. (c) What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is zero or when t1is positive? Explain.
Consider an economy in long run equilibrium described by the following equations: Y = C + I + G +...
Consider an economy in long run equilibrium described by the following equations: Y = C + I + G + NX Y = 5000 G = 1000 T = 1000 C = 250 + 0.75*( Y - T ) I = 1000 - 50*r NCO = 500 - 50*r Where r is the real interest rate (in % terms). Suppose G rises to 1250 without any change in T. Solve again for the equilibrium real interest rate and the rest...
Question 3 Consider a closed economy described by the following equations: Y=C+I+G Y-5,000 G 1,000 T=...
Question 3 Consider a closed economy described by the following equations: Y=C+I+G Y-5,000 G 1,000 T= 1,000 C 250+0.75 (Y -T) 1,000-50 a. (3 points) In this economy, compute private saving, public saving, and national saving. b. (2 points) Find the equilibrium interest rate. c. (2 points) Draw a graph containing the saving and investment curves for this economy Show the financial market equilibrium. d. (2 points) Now suppose the G rises to 1,250. Compute private saving, public saving, and...
Use the following information to determine the equilibrium Y in a 3-sector model: Y = C+I+G...
Use the following information to determine the equilibrium Y in a 3-sector model: Y = C+I+G where: C= 150+ 0.8DI | = 50 G = 200 Also assume that T = Tr = 0 DI = Y-T+ Tr $150 $400 $750 $2,000 $4,000 Question 22 (2.5 points) Which of the following actions will increase budget deficits and also the national debt? government spending decreases tax decreases money supply decreases transfer payment decreases real interest rate decreases Question 24 (2.5 points)...
Exercise 3 Consider the following model of the economy C 170 +0.6 (Y-T) に250 G-300 T...
Exercise 3 Consider the following model of the economy C 170 +0.6 (Y-T) に250 G-300 T 200 a. What is the value of the marginal propensity to consume? b. What is the value of the government budget defidt? c. Calculate the equilibrium level of GDP d. What is the value of the government-purchases multiplier? e. Use your answer to Part d to calaulate the amount by which government purchases of goods and services would have to rise in order to...
3. Consider the following Keynesian model: C 100 + 0.8 (Y-T) Planned Investment (I) 100 Government...
3. Consider the following Keynesian model: C 100 + 0.8 (Y-T) Planned Investment (I) 100 Government Purchase (G) 50 Taxes (T) = 50 a. Graph planned expenditure (PE) as a function of income (Y) b. What is equilibrium level of income (Y)? c. If government purchase (G) is increases to 50, what is new equilibrium income?
Consider our medium-run model of the economy: Y =C(Y-T)+I(Y,r+x)+G (IS) r=r (LM) TIt - Ilt-1 =...
Consider our medium-run model of the economy: Y =C(Y-T)+I(Y,r+x)+G (IS) r=r (LM) TIt - Ilt-1 = -a(ut – Un) (PC) Suppose the economy starts at a point such that ut = Un and r = rn. Graph the effects of a financial shock that increases the risk premium, x. What happens to output, the interest rate, and inflation in the short-run? What happens in the medium-run? What mechanism causes the transition from the short-run equilibrium to the medium-run equilibrium?
IV. Consider the following model and again answer related questions where DI =Y - T Y=C+I+G...
IV. Consider the following model and again answer related questions where DI =Y - T Y=C+I+G + X - IM C = 300 + 0.75DI I = 600 - 1000r G= 300 X-IM = 100 T= 0 a. How much is equilibrium level of income or output if Fed decides to set the rate of interest at 10 percent (r=0.10). b. In an effort to cool down the economy, the Fed raises the rate of interest to r =0.15. By...
16. Consider the following income/expenditure diagram in the simple Keynesian model. C,1,G, S,T Y = C+S+T -C+1+G I...
16. Consider the following income/expenditure diagram in the simple Keynesian model. C,1,G, S,T Y = C+S+T -C+1+G If taxes, T. were decreased, then a. The Y-C+S+T line would shift to the left, and ye would decrease. b. the C+/+G line would shift downward, and y' would decrease. c. The Y-C+S+T line would shift to the right, and y' would increase. d. the C+I+G line would shift upward, and y' would increase. e. neither of the lines would shift, and y'...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domesti...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domestic and foreign prices are constant and normalized to one ((p p" 1), and the nominal exchange rate equals the real exchange rate. (a) The policy makers have an output target, YT 200, and a net- export target, NXT = 0' Show how these targets can be achieved using government consumption (G) and the exchange rate (E) as policy instruments (b) Now...
Question 3 Consider a closed economy described by the following equations: Y=C+I+G Y-5,000 G 1,000 T= 1,000 C 250+0.75 (Y -T) 1,000-50 a. (3 points) In this economy, compute private saving, public saving, and national saving. b. (2 points) Find the equilibrium interest rate. c. (2 points) Draw a graph containing the saving and investment curves for this economy Show the financial market equilibrium. d. (2 points) Now suppose the G rises to 1,250. Compute private saving, public saving, and...
Use the following information to determine the equilibrium Y in a 3-sector model: Y = C+I+G where: C= 150+ 0.8DI | = 50 G = 200 Also assume that T = Tr = 0 DI = Y-T+ Tr $150 $400 $750 $2,000 $4,000 Question 22 (2.5 points) Which of the following actions will increase budget deficits and also the national debt? government spending decreases tax decreases money supply decreases transfer payment decreases real interest rate decreases Question 24 (2.5 points)...
Exercise 3 Consider the following model of the economy C 170 +0.6 (Y-T) に250 G-300 T 200 a. What is the value of the marginal propensity to consume? b. What is the value of the government budget defidt? c. Calculate the equilibrium level of GDP d. What is the value of the government-purchases multiplier? e. Use your answer to Part d to calaulate the amount by which government purchases of goods and services would have to rise in order to...
3. Consider the following Keynesian model: C 100 + 0.8 (Y-T) Planned Investment (I) 100 Government Purchase (G) 50 Taxes (T) = 50 a. Graph planned expenditure (PE) as a function of income (Y) b. What is equilibrium level of income (Y)? c. If government purchase (G) is increases to 50, what is new equilibrium income?
Consider our medium-run model of the economy: Y =C(Y-T)+I(Y,r+x)+G (IS) r=r (LM) TIt - Ilt-1 = -a(ut – Un) (PC) Suppose the economy starts at a point such that ut = Un and r = rn. Graph the effects of a financial shock that increases the risk premium, x. What happens to output, the interest rate, and inflation in the short-run? What happens in the medium-run? What mechanism causes the transition from the short-run equilibrium to the medium-run equilibrium?
IV. Consider the following model and again answer related questions where DI =Y - T Y=C+I+G + X - IM C = 300 + 0.75DI I = 600 - 1000r G= 300 X-IM = 100 T= 0 a. How much is equilibrium level of income or output if Fed decides to set the rate of interest at 10 percent (r=0.10). b. In an effort to cool down the economy, the Fed raises the rate of interest to r =0.15. By...
16. Consider the following income/expenditure diagram in the simple Keynesian model. C,1,G, S,T Y = C+S+T -C+1+G If taxes, T. were decreased, then a. The Y-C+S+T line would shift to the left, and ye would decrease. b. the C+/+G line would shift downward, and y' would decrease. c. The Y-C+S+T line would shift to the right, and y' would increase. d. the C+I+G line would shift upward, and y' would increase. e. neither of the lines would shift, and y'...
2. Consider the following short-ru model of an open economy: Y C+I+G+NX = 50 IM = -EY The domestic and foreign prices are constant and normalized to one ((p p" 1), and the nominal exchange rate equals the real exchange rate. (a) The policy makers have an output target, YT 200, and a net- export target, NXT = 0' Show how these targets can be achieved using government consumption (G) and the exchange rate (E) as policy instruments (b) Now...
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