Please explain mathematically all parts.
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Please explain mathematically all parts.
6 Consider a closed economy with no government. Use notation Y...
(a) 8 marks Consider a closed economy with no government. The consumption function is C =...
(a) 8 marks Consider a closed economy with no government. The consumption function is C = 100+ 0.8Y where Y is income. • What is the relationship between income, consumption and investment in equilibrium? • What is the multiplier? • What happens to income Y if investors become more optimistic and increase investment by 20? • What is the relationship between planned savings and planned investment in equilibrium?
Consider a closed economy described by the following equations (all figures in millions of dollars): Y...
Consider a closed economy described by the following equations (all figures in millions of dollars): Y = C + + G Assume current value of output Y in this economy equals $8,000.00 Annual government expenditure equals $2,000.00 Current level of income tax is combination of flat Tax and income adjusted, based on following tax rate; 1,000 + .1(Y) Current annualized consumer spending equals to: 450 +0.75 (DI), were DI Disposable income = Income - Tax Current level of short term...
2. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so...
2. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so that its net exports are zero. Suppose that the economy has the following consumption function, where C is consumption, Y is income (real GDP), IP is planned investment, G is government purchases, and T is taxes: C = $45 billion+0.75×(Y – T) Suppose G=$60 billion, IP=$60 billion, and T=$20 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure...
Answer parts e-f Problem 2: (20 points) Consider an economy which is closed and has no government. Suppose the consumpt...
Answer parts e-f
Problem 2: (20 points) Consider an economy which is closed and has no government. Suppose the consumption function is given by C 50 0.4Y and the investment is given as I 25 a. What is the equilibrium level of income in this case? (5 points) b. What is the level of saving in equilibrium? (2 points) c. If, for some reason, output is at the level of 300, what is the level of involuntary inventory accumulation? Is...
sing and government purchases are leakages. 8. In a mixed closed economy: A taxes and government...
sing and government purchases are leakages. 8. In a mixed closed economy: A taxes and government purchases are leakages, while investment and saving are injections. • taxes and investment are injections, while saving and government purchases are leakages. taxes and savings are leakages, while investment and government purchases are injections. 1. government purchases and saving are injections, while investment and taxes are leakages. 9. In a mixed open economy, the equilibrium GDP is determined at that point where: A.S. +M+...
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...
6. Suppose the economy is characterized by the following behavioral equations: C = 1,500+.6YD I= 2.000...
6. Suppose the economy is characterized by the following behavioral equations: C = 1,500+.6YD I= 2.000 - 10,000 G= 2,000 T= 2.000 a. At an interest rate of 10%, solve for equilibrium income (Y). disposable income (Y). consumption (C), investment (1), private saving, and public saving. b. What is the marginal propensity to consume in this economy? c. Now suppose that instead of taxes being a fixed quantity, taxes vary with income (as in many countries like the United States)...
Answer parts a-d. Problem 2: (20 points) Consider an economy which is closed and has no...
Answer parts a-d.
Problem 2: (20 points) Consider an economy which is closed and has no government. Suppose the consumption function is given by C = 50+ 0.4Y and the investment is given as I = 25. a. What is the equilibrium level of income in this case? (5 points) b. What is the level of saving in equilibrium? (2 points) c. If, for some reason, output is at the level of 300, what is the level of involuntary inventory...
1.Consider a closed economy with no taxes, whose consumption function, investment level & government spending level...
1.Consider a closed economy with no taxes, whose consumption function, investment level & government spending level are given by the following equations: C= 5,000 + .80Y I= 9,000 G= 2000 whereGrepresents government spending. The equilibrium condition is, as always, that the value of the economy’s output (Y) must be matched by aggregate demand, but now aggregate demand contains a third element, G. a. What is the equilibrium level of aggregate output for this economy? b. What is the saving function for this...
1. The economy has 8 million units of capital and 8 million units of labor. The...
1. The economy has 8 million units of capital and 8 million units of labor. The production function is and A = 1. The consumption function is: C = 1.5 million + 0.75 (Y-T) Investment demand is: I = 3 million – 0.2 million x (r%) Taxes (T) are 2 million. Government purchases (G) are 1 million. Given this information, answer the following questions: a. What it total output (Y) in this economy equal to? b. What is disposable income...
(a) 8 marks Consider a closed economy with no government. The consumption function is C = 100+ 0.8Y where Y is income. • What is the relationship between income, consumption and investment in equilibrium? • What is the multiplier? • What happens to income Y if investors become more optimistic and increase investment by 20? • What is the relationship between planned savings and planned investment in equilibrium?
Consider a closed economy described by the following equations (all figures in millions of dollars): Y = C + + G Assume current value of output Y in this economy equals $8,000.00 Annual government expenditure equals $2,000.00 Current level of income tax is combination of flat Tax and income adjusted, based on following tax rate; 1,000 + .1(Y) Current annualized consumer spending equals to: 450 +0.75 (DI), were DI Disposable income = Income - Tax Current level of short term...
Answer parts e-f
Problem 2: (20 points) Consider an economy which is closed and has no government. Suppose the consumption function is given by C 50 0.4Y and the investment is given as I 25 a. What is the equilibrium level of income in this case? (5 points) b. What is the level of saving in equilibrium? (2 points) c. If, for some reason, output is at the level of 300, what is the level of involuntary inventory accumulation? Is...
sing and government purchases are leakages. 8. In a mixed closed economy: A taxes and government purchases are leakages, while investment and saving are injections. • taxes and investment are injections, while saving and government purchases are leakages. taxes and savings are leakages, while investment and government purchases are injections. 1. government purchases and saving are injections, while investment and taxes are leakages. 9. In a mixed open economy, the equilibrium GDP is determined at that point where: A.S. +M+...
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...
6. Suppose the economy is characterized by the following behavioral equations: C = 1,500+.6YD I= 2.000 - 10,000 G= 2,000 T= 2.000 a. At an interest rate of 10%, solve for equilibrium income (Y). disposable income (Y). consumption (C), investment (1), private saving, and public saving. b. What is the marginal propensity to consume in this economy? c. Now suppose that instead of taxes being a fixed quantity, taxes vary with income (as in many countries like the United States)...
Answer parts a-d.
Problem 2: (20 points) Consider an economy which is closed and has no government. Suppose the consumption function is given by C = 50+ 0.4Y and the investment is given as I = 25. a. What is the equilibrium level of income in this case? (5 points) b. What is the level of saving in equilibrium? (2 points) c. If, for some reason, output is at the level of 300, what is the level of involuntary inventory...
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