explain the following statement: for an economy to be in equilllibrium , planned investment spending plus...
explain the following statement: for an economy to be in equilllibrium , planned investment spending plus goverment purchases must be equal saving plus net taxes?
Homework Answers
Saving + taxes = investment + government expenditure.
When the economy is in equilibrium the consumption will be equal to the expenditure. Saving and taxes are leakages and decrease the consumption and government expenditure and investment are expenditure that add to the economy. If the leakage and the injection are equal the economy is in equilibrium.
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explain the following statement: for an economy to be in
equilllibrium , planned investment spending plus...
An economy is initially at full employment, but a decrease in planned investment spending (a comp...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the marginal propensity to consume (mpc) of this economy is 0.75 and that the multiplier is 4 a. How large is the recessionary gap after the fall in planned investment? The recessionary gap is times the size of the fall in planned investment. b. By how much would the government have to change its...
An economy is initially at full employment, but a decrease in planned investment spending (a component...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the mpc of this economy is 0.75 and that the multiplier is 4. LO4, L05) a. How large is the recessionary gap after the fall in planned investment? b. By how much would the government have to change its purchases to restore the economy to full employment? c. Alternatively, by how much would the...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 10r; c = 0.6; Ta = 1,800; Ip = 2,400 – 50r; G = 2,000; NX = -200 (a)Derive Ep and...
Suppose that consumption is $2,200, investment is $350, and government spending is $500. The economy is...
Suppose that consumption is $2,200, investment is $350, and government spending is $500. The economy is closed so there are no net exports. Taxes are $425. Based on this information: National saving is $ Private saving is $ Government (public) saving is $ Enter whole numbers.
Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 mi...
Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP? The answer is 27 million can someone show how they got it
3. National accounting identities Let I stand for investment spending, G for government purchases, X for...
3. National accounting identities Let I stand for investment spending, G for government purchases, X for exports, S for saving, NT for net taxes (taxes minus transfer payments), and IM for imports. Consider the following identity and answer the questions that follow. I+ G+X = S+ NT + IM Which of the following best characterizes the above identity? The total amount of leakages from the nation's flow of income and expenditures must equal national income The total amount of leakages...
The following table shows the relationship between income and consumption in an economy. Income (Y) ($...
The following table shows the relationship between income and consumption in an economy. Income (Y) ($ billion) Consumption (C) ($ billion) 0 5 10 11 20 17 30 23 40 29 50 35 60 41 70 47 80 53 90 59 100 65 Assume Investment (I) is $5 billion, government purchases (G) are $4 billion, and net exports (X) are $2 billion. Assume net taxes (T) equal zero. a. What is the numerical value of the marginal propensity to...
Consumption spending in a country is represented by C = 1800+ 0.8(Y-T ). Planned investment is...
Consumption spending in a country is represented by C = 1800+ 0.8(Y-T ). Planned investment is 900, government purchases G = 0, net exports NX = 100 and T = 0.2Y. Write down planned aggregate spending of the economy as a function of Y. Zero points if you do not show your work. (3) An important trading partner of the country goes through a major recession, decreasing the country’s net exports by $500. Use the Keynesian AE model to analyze...
2. Effect of Investment Suppose in a closed private economy households are spending 75 cents from...
2. Effect of Investment Suppose in a closed private economy households are spending 75 cents from each additional dollar that they receive as an income. Moreover, when they do not have any income, they are still spending $100 on their needs. (a) Derive the consumption function and the saving function in this economy. Draw the graphs in the (C-Y) space and in the (S-Y) space. (b) If there is no investment in the economy, what is the equilibrium level of...
Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals...
Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals actual spending. (a) Explain what planned spending and actual spending are (b) Graphically present the equilibrium condition of the economy in the Keynesian cross model. (c) Explain how the economy adjusts to equilibrium if the economy finds itself with a level of planned spending which is less than actual spending (3 marks) (d) Explain why an increase in government spending leads to a greater...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the marginal propensity to consume (mpc) of this economy is 0.75 and that the multiplier is 4 a. How large is the recessionary gap after the fall in planned investment? The recessionary gap is times the size of the fall in planned investment. b. By how much would the government have to change its...
An economy is initially at full employment, but a decrease in planned investment spending (a component of autonomous expenditure) pushes the economy into recession. Assume that the mpc of this economy is 0.75 and that the multiplier is 4. LO4, L05) a. How large is the recessionary gap after the fall in planned investment? b. By how much would the government have to change its purchases to restore the economy to full employment? c. Alternatively, by how much would the...
Suppose that consumption is $2,200, investment is $350, and government spending is $500. The economy is closed so there are no net exports. Taxes are $425. Based on this information: National saving is $ Private saving is $ Government (public) saving is $ Enter whole numbers.
3. National accounting identities Let I stand for investment spending, G for government purchases, X for exports, S for saving, NT for net taxes (taxes minus transfer payments), and IM for imports. Consider the following identity and answer the questions that follow. I+ G+X = S+ NT + IM Which of the following best characterizes the above identity? The total amount of leakages from the nation's flow of income and expenditures must equal national income The total amount of leakages...
2. Effect of Investment Suppose in a closed private economy households are spending 75 cents from each additional dollar that they receive as an income. Moreover, when they do not have any income, they are still spending $100 on their needs. (a) Derive the consumption function and the saving function in this economy. Draw the graphs in the (C-Y) space and in the (S-Y) space. (b) If there is no investment in the economy, what is the equilibrium level of...
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