In the GDP function Y = C + S + I, where C=consumption (a+bY), S = savings and I = investment, how are C+S+I impact when... 1. Y (real income) increases? 2. r (real interest rate) increases)?
GDP Function:
1.
When real income Y increases,
increases as well
Thus C+S+I increases with an increase in Y
2.
Investment is negatively related with r.
Thus when r increases, I falls down.
Thus C+S+I decreases with an increase in r.
In the GDP function Y = C + S + I, where C=consumption (a+bY), S = savings and I = investment, ho...
19. Suppose that GDP (Y) is 5,000. Consumption is given by the consumption function C = 500 + 0.5(Y – T). Investment (I) is given by the investment function I = 2,000 – 100r, where r is the real interest rate in percent. Government spending (G) is 1,000 and net taxes (T) is also 1,000. When an increase in business optimism boosts the investment function to I = 3,000 – 100r: a. I rises by 1,000 and r rises by...
Savings/Investment in Class GDP = 10 Consumption = 7 Government Spending = 2 Private Savings = 1 Transfer Payments = 1 A) Calculate Taxes, Investment, Public Savings and National Savings B) Draw the graph of the market for loanable funds, assuming the equilibrium interest rate i* = 3% Make sure to label the axis and equilibrium points C) If G increases so that now G = 2.5, recalculate Public Savings, National Savings and Investment. (assume that any other variables stay...
1-If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:2-Assume that the consumption function is given by C = 150 + 0.85(Y – T) and the tax function is given by T = t0 + t1Y. If t0 increases by 1 unit, then consumption:3- Assume that the consumption function is given by C = 200 + 0.7(Y – T), the tax function is given by T = 100...
Assume that GDP (Y) IS 5,000. Consumption (C) is given by the equation C-1,200+0.5(Y-T)-50r, where r is the real interest rate in percentage. Investment (I) is given by the equation I=1,500-50r. Taxes (T) are 1,200 and government spending (G) is 1,500. 1) What are the equilibrium values of C, I, and r? 2) What are the values of private saving, public saving, and national saving?
Where Y is GDP, C is consumption, I is investment, G is government spending, and there is no international trade, national saving equals: A) Y – C – I. B) C + I + G. C) Y – C – G. D) Y + C + G.
On the planet Zorp, consumers consume mechanically based on the following consumption function ? = ?0 + 0.6? − 500?, where C is consumption, C0 is a constant, Y is consumers’ income (equivalent to GDP), and i is the interest rate written in decimal terms (i.e. a 5% interest rate gives i=0.05). Investors invest based on the following function: ? = ?0 − 1000?, where I is investment and I0 is a constant. There is no government in Zorp, so...
Consider the economy of Wiknam. The consumption function is given by C = 250+ 0.6(Y-T). a. Government purchases and taxes are both 100. In the accompanying diagram, graph the IS curve for r ranging from 0 to 8 by dragging and dropping the end points to the correct locations b. The money supply M is 2,875 and the price level Pis 5. In the accompanying diagram, graph the LM curve for r ranging from 0 to 8 by dragging and...
1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...
1. Consider the following consumption function and the national income identity. C=0.01Y2 +0.8Y+200 Y=C+S Where, C is consumption and Y is national income, and S is saving a) Calculate the value of marginal propensity to consume (MPC) when Y=8 b) Find the expression for savings function and using that function calculate marginal propensity to save (MPS) when Y= 8.