1. Assume a private, closed economy where Y = C + I, and C = 10 + 0.9Y and I = 15. (Values in $ billions.)
i) The 45 degree graph
ii) savings/investment graph
a) Solve for the new equilibrium level of national income.
b) Calculate the size of the
i) new multiplier
ii) budget balance
i) New multiplier
ii) Trade balance
iii) Budget balance
a) Government spending ( G )
b) Autonomous taxes ( Ta )
c) The tax rate (t)
(I) Private closed economy
(Part a)
Y = C + I
Y = 10 + 0.9Y + 15
0.1Y = 25
Y = $250 billion
(Part b)
Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.9) = 1/0.1 = 10
(Part c)
(i)
PAE = C + I
PAE = 10 + 0.9Y + 15
PAE = 25 + 0.9Y
When Y = 0, PAE = 25 (Vertical intercept)
In following graph, planned aggregate expenditure (PAE) and real GDP (Y) are measured vertically and horizontally respectively. Initial Equilibrium is at point A where 450 line intersects initial aggregate expenditure curve PAE0 (with vertical intercept of 25), with equilibrium GDP Y0 (= 250) and planned aggregate expenditure E0 (= 250).
(ii)
S = Y - C
S = Y - 10 - 0.9Y
S = 0.1Y - 10
When Y = 0, S = - 10 (Vertical intercept)
In following graph, Saving (S0) and Investment (I0) are shown, where investment is horizontal straight line (being autonomous). Initial Equilibrium is at point A where S0 intersects investment curve I0, with equilibrium GDP Y0 (= 250) and equilibrium saving/investment I0 (= 15).
(II) Private economy with government
(Part a)
Y = C + I + G
Y = 10 + 0.9(Y - 5 - 0.1Y) + 15 + 25
Y = 50 + 0.9(0.9Y - 5)
Y = 50 + 0.81Y - 4.5
0.19Y = 45.5
Y = $239.47 billion
NOTE: As per Chegg's Policy, I've answered 1st 4 parts only. You need to post rest of the parts separately, 4 at a time.
I need help with this. 1. In an economy which has a national income identity as the following; Y= C+ I + G + NX where C = 400 + 0.6 Yd,; 1 = 1000-4600 r, G-1240 T-200 +0.25 Y; NX-400-0.05Y-8 00 e ( ofcourse, Yd=Y-T) Where e- foreign currency/ domestic currency, and initially set at e 1.25+2.5R The money demand function is Md- 0.75 Y-7500 r, and money supply is set by the Central Bank at 450. All calculation...
Question 3: Multiplier Model (20 Points] Suppose the components of a closed economy can be described by the following set of equations: Y=C+I+G C= 1200 +0.8 (Y-T) I = 750 G = 900 T=950 (a) Is the government currently running a balanced budget, a budget deficit or a budget surplus? Explain. [3 Points (b) Calculate the equilibrium income. [6 Points) (c) Graphically illustrate, using the Keynesian Cross Diagram, the effect of a decrease in government spending on equilibrium output. [5...
A5-10. Suppose the following aggregate expenditure model describes an economy: C = 100 + (5/6)Yd T = (1/5)Y 1 = 200 G = 400 X = 300 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium level of national income....
1. Consider an economy where aggregate expenditures can be characterized by the following information: household consumption C = 100+ 0.8Yd, investment expenditure 1 = 100, government expenditure G = 300, exports X = 300 and imports IM = 0.14Y. Suppose that the income tax rate is 20%, and that the government has no initial debt, so that D = 0. (a) Solve for the AE function and the equilibrium level of national output Y. (b) Solve for the government's budget...
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...
19. Consider a closed economy where the consumption function is C = 100+ 0.8(Y – T), where T represents lump sum taxes. Investment is fixed at 100, and government spending is also 100. a. Assuming that the budget is balanced, calculate the equilibrium income for this economy. b. Suppose the government is committed to a balanced budget, but it sees that the economy is overheating (growing too fast). It decides to lower both government spending and taxes by 50 each....
6) Consider a closed economy described by the following equations: (1) Y=C+I+G (2) Y = 5(K)S(L)05 (3) K = 1600 (4) L = 1600 (5) G = 2500 (6) T = 2000 (7) C = 1000 + 2/3 (Y-T) (8) I= 1200 - 100r, where r is the real interest rate. a) What is the equilibrium level of income? Show your work. b) Solve for the equilibrium interest rate (r) and the level of investment (I). The interest rate will...
ONLY 5-11 BELOW A5-10. Suppose the following aggregate expenditure model describes an economy: C = 100 + (5/6)Yd T = (1/5)Y I = 200 G = 400 X = 300 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y is national income, I is investment, G is government spending, X is exports, and IM is imports. (a) Derive a numerical expression for aggregate expenditure (AE) as a function of Y. Calculate the equilibrium level...
Suppose that the following equations characterize the economy; C=$160+0.80Y_D I=$300 G=$200 T=$200 Please answer the following questions; Write down the equilibrium condition (please use Z for the total demand for goods and Y for production). Write down an equation for Z. Calculate GDP (Y=?) Calculate the multiplier Calculate consumption? What is saving? Suppose that private firms are less confident about the future path of the economy. Firms cut investment by $100. Now the economy is experiencing an economic crisis. Calculate...
An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$: Y = C + I + G + X – M C = 10 + 0.8 Yd T = 10+ 0.2Y X = 80 I = 35 G = 15 TR = 10 – 0.05Y M = 22 + 0.1Y Where: Y is domestic income Yd is private disposable income C is...