Consider an economy with the following equations:
T=100+0.2Y
L=0.5Y-500i
Y=2500
G=600
M=133,200
(short run price)
If government purchases rises from 600 to 690, calculate the multiplier in the short run
Consider an economy with the following equations: T=100+0.2Y L=0.5Y-500i Y=2500 G=600 M=133,200 (short run price) If...
For an economy described by the following equations: C = 1,800 + 0.6 (Y – T) I p = 900 G = 1,500 NX = 100 T = 1,500 Y* = 9,000 Assume that the multiplier for this economy is 2.5. Find the effect on short-run equilibrium output of: a. An increase in government purchases from 1,500 to 1,600. Instructions: Enter your responses as whole numbers. Short-run equilibrium output will (Click to select) increase decrease to . b. A decrease in tax collections from 1,500...
. Consider an economy described by the following equations. Ip = 700 X = 100 T = 1500 Y* = 10000 Cd = 1800 + 0.6(Y-T) G = 1500 M = 0 u* = 4 where Cd is consumption on domestically produced goods, G is government expenditure, M is imports, u* is the natural rate of unemployment, P is planned investment spending, X is exports, T is tax revenue and Pis potential output. Derive the equation for planned aggregate expenditure...
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...
2. An economy is described by the following equations C 40 + 0.8(Y-7) P 70 G- 120 T 150 The multiplier in this economy is 5.(LO4. LO5) a Find a numerical equation relating planned aggregate expenditure to output b Construct a table to find the value of short-run equilibrium output. (Hint: The economy is fairly close to full employment) c By how much would government purchases have to change in order to eliminate any output gap? By how much would...
An economy is described by the following equations: Y = C + I + G C = 0.75 YD + 20 T = 0.2 Y + 4 G = 20 I = 25 Calculate equilibrium output and equilibrium private and public saving. With how much does equilibrium output falls, if government reduces government expenditure with 1 unit? Explain the event in b) for the multiplier diagram
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...
Consider the following economy (with flexible exchange rate system): • Desired consumption: Cd = 300 + 0.5Y −2000r • Desired investment: Id = 200−3000r • Government purchases: G = 100 • Net export: NX = 350−0.1Y −0.5e • Real exchange rate: e = 20 + 1000r • Full employment: ¯ Y = 900. • Nominal money stock: M = 4354 • Real money demand: L = 0.5Y −200r 1 (a) Find the equations for NX(r,Y )) and Sd(r,Y )−Id(r) and...
Closed Economy In the Short Run. I have solved (a) but confused on how to solve the rest. I-MPC sider the following model of a closed economy in the short run Total demand is given by the accounting identity I MPC Y =C+I+G The consumption function is C = ao + a (Y +TT - TT) - MPC The tax schedule is Tx = To + TY Transfers are given by Th = Tro – hY Investment demand is I=bo-bzi...
Question 1: IS-LM-AD in a closed economy (35 Marks) The following represent the key equations for a closed economy: Md 18+0.5Y-450 Money demand C" = 6 + 0.8(Y-T)-250r 1 -33-200r u-u0.3 a) Write out the equations for the IS and LM curves for this economy, with the real Desired consumption Desired investment Initial budget position Okun's law Y-Y rate of interest (r) on the left-hand side. Next, use these relationships to find the AD curve, written with output (Y) on...
Stacked An economy is initially described by the following equations: C = 60+ 0.8(Y-T) I = 120-5 M/P = Y-25r G = 200 T = 200 M = 3000 P = 3 a. Derive and graph the IS and LM curves. Use the accompanying diagram to graph the IS and LM curves by placing the endpoints at the correct location, then place point A at the equilibrium interest rate and level of income. IS: Y= LM: Y= IS: Y= LM:...