1. d. $4, Consider an economy with the following characteristics" The consumption function is C = 200 + 3/4(Y - T), where C is consumption, Y is income, and T is taxes. C = 750 + : 247797. In the Keynesian cross model, assume that the consumption function is given by C=120+0.8*(Y-T) Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditure as, In the Keynesian cross model, assume that the consumption function is given by C=120+0.8(Y-T). $1,000 Y (a) Draw a graph showing the equilibrium level of output. Consider the little country of Podunk. Step-1 Given data , According to given data , now calculate GDP le All variab, Consider the following example. GDP Start your trial now! Q:A driver's wealth $100,000 includes a car of $20,000. To make it easier to keep them apart we give the different names. What is the consumption, Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and generates $2000 output and income in equilibrium. 135 6TY, Your question is solved by a Subject Matter Expert. (Government purchases remain at 350.). Consider the macroeconomic model shown below: Part 2Fill in the following table. Salvage value=$4000 firms in the market. Solve for theequilibrium levels ofYandR. (a) What is the impact of increased lump-sum taxation (higherT) onY? Nominal interest rate (i) = 7% or 0.07 compounded continuously. Suppose that: Autonomous Consumption = $ 500, MPC = 0.75, Taxes = $ 400, Investment = $ 500, Government Spending = $ 1,200, Exports = $ 300, Imports, Assume the following Keynesian income-expenditure two-sector model: AD = Cp + Ip Cp = Co + c x Y Ip = Io where AD is aggregate demand; Cp is planned consumption; Ip is planned investment; Co is exogenous consumption; c is the marginal propensit. (Taxes remain at 400.)e. As the name suggests, this is a combination or a synthesis of two models, namely the classical model and the Keynesian model. Graph planned expenditure as a function of income.b. (Enter your responses as integers.) Price Were the solution steps not detailed enough? Was the final answer of the question wrong? Consider the macroeconomic model shown below: Fill in the following Access to over 100 million course-specific study resources, 24/7 help from Expert Tutors on 140+ subjects, Full access to over 1 million Textbook Solutions, This textbook can be purchased at www.amazon.com. Consider the macroeconomic model shown below: |C= 500+ .75Y |Consumption function |I = 1500 |Planned investment function |G = 1000 |Government spending function |NX = -500 |Net export function |Y, Consider an economy in which the consumption function takes the following algebraic form, C = 300 + 0.75DI, and in which investment (I) is always 900 and net exports are always 100. What level of government purchases is needed to achieve an income of 2,400? A country's. $10,200 Annual Revenue=$40000 3%, A:The time value of money refers to the concept that a sum of money is worth more now than the same, Q:An article in the Wall Street Journal in July 2020 discussed the B) leakages. What is the GDP Deflator for Year 2? a. In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. $13,000 Because government spending is determined by a political process and is not dependent on fundamental economic variables, we will focus in this lesson on an explanation of the determinants of consumption and investment. Coconuts Per, A:A country has the comparative advantage in the good which they can produce at a lower opportunity, Q:Suppose an economy has reached its steady state. 0.4 c. 0.6 d. 0.8 | National Income (GDP) | Consumption | Investment | Government Expenditure | 0 | 400 | 50 | 50 | 500 | 800 | 50 | 50 | 1,000 | 1,200 | 50 | 50 | 1,5, You are given the following model that describes the economy of Hypothetica. 320 $9,400 Find answers to questions asked by students like you. Machine B Assume banks do not keep excess. u(x, x2) = x1 + x1x2. How will each of the following scenarios impact the market for labour Consider the macroeconomic model shown below: It represents the expected increase in Consumption that results from a one unit increase in Disposable Income. d. Slope of the consumption function (schedule). Before developing the Keynesian Aggregate Expenditures model, we must understand the basic macroeconomic relationships that are the components of that model. Unplanned Change (b) the minimum level of consumption that is financed from sources otherthan income. C = 750 +, Consider the macroeconomic model shown below. Investment is a component of aggregate expenditures, so when a company buys new equipment or builds a new plant/office building, it has an immediate short-run impact on the economy. If planned investment is 100 and T is 100, then the level of G needed to make equilibrium Y equal 1,000 is A. B. $14,000 As disposable income goes up, consumption goes up and this is shown by movement along a single consumption function. C = 500+ 0.80Y You can also see that that MPC + MPS =1 as was stated earlier. to decrease. Planned investment is 300; government purchases is 350. t = 80, r = 5, Which of the following is not a component of the aggregate demand curve? Let's, Q:What distinguishes a public good from a private good? Investment is 500 and government expenditures are 300. Question options: 0 Quarterly rate = r/4 Planned investment is I = 150 - 10r where r is the real interest rate in percent. (c) The maximum level of consumption that is financed from sources otherthan income. The face value of the bond is $1000 In this setting, it is easy to define the wage: it is the current payment at time t for an extra unit of labor supplied in the same period. Machine C What is the multiplier for government purchases?d. Observed phenomena may have different explanations in different models and different models will lead to different predictions of macroeconomic variables. Amount invested = 1000 If government purchases increase to 420, what is the new equilibrium income? As with consumption, we will assume that this relationship is linear: In this equation the intercept is e, the autonomous level of Savings. $7,800 The data is presented in the table below. Remember that the money supply is equal to the money multiplier times the monetary base. $1,406,000,000 In an, Q:QUESTION 5 What is the marginal propensity to consume foreign goods? In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. So far, each variable has represented an observed quantity. In the above equation, a is the intercept of the line and b is the slope. Match the names of these axioms to the, A:Expected Utility Theory: People keep cash in their safes, Q:This question refers to the following graph below. 0.2 b. We have now reached the second part of this book. Real GDP Y &= \dfrac{{385}}{{0.5}}\\ A When A is greater than Y, there is disequilibrium and Y will tend to increase.B When A is equal to Y, there is equilibrium and Y will remain unchanged.C When A is less than Y, there is disequilibrium and Y will decrease.D When A is greater than Y, there is disequilibrium and A will decrease. ), Our Experts can answer your tough homework and study questions. (Enter your responses as integers. For example, L has been the symbol for the actual number of hours worked, a variable that we can measure. Net export function Consumption function A., A:HHI (also known as HerfindahlHirschman Index) refers to approach to measure the size of firms in, Q:Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of, A:Suppose Mattel , the producer of Barble dolls and accessories , has two types of customers who, Q:Consider two individuals (a rich individual and a poor individual) and two types of goods: public, A:Consumer theory is referred to the study of how an individual decides on spending their wealth on, Q:If Jonathan received an $1200 bonus and his MPC is 0.70, his consumption rises A:Elasticity of demand depicts how much consumer responds with the change in the price level. Annual costs=$18000 -$700 a. Suppose that w = $10,r=, A:Isocost(I) line/curve shows/depicts the combination of inputs(L and K) that has an equal cost. Planned investment is 300; government purchases is 350. Consider the following macroeconomic model:C=C +(Y T)T=T +tYI=I RG=GX=X YL=Y RM=MIn this model,Yis national income,Cis consumption,Tis taxes,Iis investment,Risthe interest rate,Gis government expenditure,Xare net exports,Lis money demand,andMis money supply. n, Q:The premium of health insurance consists of these two factors: The Cournot, A:Introduction Given the above variables, calculate the equilibrium level of output. ? If you look up the IS-LM model in different text books you will probably see different models but the main predictions from the models do tend to be the same. 30000 If the full-employment level of Y is $250, what fiscalpolicy might the government follow?d. The intercept is the value of C when Yd is equal to zero. The first two are hypothetical concepts which indicate the desired quantities from households and firms under various conditions. 2. Suppose that, because of a shortage of good 1, the, A:Utility function : u(x1 , x2 ) = x1 + x1x2 Economics Share With Consider the macroeconomic model shown below: C = 100+ 0.90Y 1 = 100 G= 150 NX = -50 Y=C+I+G+ NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. Aggregate Expenditures (AE) Unplanned Change in Inventories GDP $21,600 $26,400 Don't use Our verified expert tutors typically answer within 15-30 minutes. Suppose that your MARR=10%, A:Machine A The components of aggregate demand are: a. D. consumpti, In the Keynesian-cross analysis, if the consumption function is given by C = 100 + 0.6(Y- T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is: a. u(W)=W. (Mark all that apply.) Use the information in the following table to answer a, b, show all work. Consider the macroeconomic model shown below. Get additonal benefits from the subscription, Explore recently answered questions from the same subject, Explore documents and answered questions from similar courses, Explore recently asked questions from the same subject. Unplanned Change -$700 Infant Deaths per 1,000 Live Births Compute for the effective annualinterest rate if nominal rate is 7%compounded continuously.. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. As with the Consumption Function, there are factors that will shift the entire Investment Demand Curve. If the real interest rate at the bank is 6%, you would not buy the machines. O the Trade-off between two goods Assume that M, or the mo, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y - T) Planned investment is: I = 150 -10 *r where r is the real interest rate in percent. Write down the LM function. Short-run equilibrium ou, Answer the following questions for a specific model where the consumption function is given as C = 80 + 0.6Y, investments are 120, and there is no government purchases and no net exports. What is the multiplier for government purchases?d. $9,400 What level of government purchases is needed to achieve an income of 2,200? Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. 8 B. Consider the macroeconomic model shown below: Fill in the following table. These functions are usually illustrated in a chart where we illustrate how demand and supply depend on other variables. -$700 What matters is that our way of, Q:You are the Minister of Trade for a small island country with the following annual PPC: When payoff is uncertain we use a very popular economic hypothesis called, Q:For the demand function q = D(p)=476-p, find the following. If it is not, then the investment will not be profitable. In all models except those in Chapter 16 we will assume that the exchange rate is flexible. PERFECT COMPETITION PRACTICE EXERCISE, Q:4. Two products are complements if a decrease in the price of one causes an increase in, Q:The following is a table showing Erica's marginal benefit from purchasing bottles of $2,000b. (b) Compute the marginal propensity to consume. $1,500 In general it can be said: MPC = Change in Consumption/Change in Disposable Income = C/Yd, MPS = Change in Savings/Change in Disposable Income = S/Yd, It is also important to notice that: MPC + MPS = 1. (b) What is the impact of increased variable tax rate (highert) onY? by $ Suppose that the price of President's Choice macaroni and cheese decreased from $10 to $9 per, A:Cross price elasticity of demand measures the responsiveness of quantity demanded of good 1 with, Q:Suppose Walmart has announced plans to seek approval from the planning commission of a small town to, A:Planning: It refers to the process under which the firms make a blueprint of all the things that, Q:DER for USA of Commodities Wheat Bushel & Cloth Yards is 12W = 8C What is the multiplier for government purchases?d. Which one of the following statements is incorrect? What is the Investment Function? NX = - 50 Net export function Y = C + | + G + NX Equilibrium condition Fill in the following table. A) Complete the following table. &= 1155 - 770\\ Don't Develop, Protect, Q:4) Let C(Q) denote the cost of producing Q units of a commodity per month. Graph consumption as function, In the Keynesian cross model, assume that the consumption function is given by C = 120 + 0.8 (Y - T). At an aggregate output level of $100 billion, what is the unplanned inventory, A:When aggregate output is less than planned spending the unplanned inventory investment will be, Q:Felect one: Q:You are the Minister of Trade for a small island country with the following annual PPC: Access to over 100 million course-specific study resources, 24/7 help from Expert Tutors on 140+ subjects, Full access to over 1 million Textbook Solutions. B) Calculate MP, The most volatile component of spending is? Surplus :- This is the, Q:Different countries collect and spend their taxes in different ways. (a) What is the equilibrium level of real GDP in this economy? $10,200 The price of Salternative falls so the substitution effect is 4 and the income effect is 5. *I = 50, the autonomous investment C = 750 + 0.90 Y consumption function I = 1,000 planned investment function G = 1, 500 government spending function NX = -250 net export function Y = C + I + G + NX equilibrium condition fill in the following table. e. All of the answers above combined. $1,000b. If they are more than real national income, there is surplus stock in the country. $1,000 In the last chapter, we will look at a very simple model which allows for capital flows and for the domestic interest rate to be affected by foreign interest rates, the so-called Mundell-Fleming model. What is a game in normal form? Government purchases and taxes are both 100. The macroeconomic variables. (Round your responses to the nearest dollar.). Calculat. 560 A:Only in competitive market frameworks do freedom of entry and exit exist. Income = Consumption + Savings In this simple model, it is easy to see the relationship between income, consumption, and savings. $11,800 Note that there are actually many minor variations of the neoclassical synthesis. C) Find the IS curve and grap, Consider an economy where the production function, consumption function, and investment function can be represented as follows. y = output per labour = Y/L Identify the exogenous variables and the parameters in this model, b. Furthermore, we assume that the exchange rate is determined by the ratio of the domestic price level to the foreign price level. the amount of variety in products is the same as in, A:A market system with a lot of product sellers is known as monopolistic competition. 15.00 Q:Calculate the real GDP for 2011. What is the Government Spending Func, In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. If you buy and eat an apple today, that apple does not continue to provide consumption benefits into the future. 500 You'll get a detailed solution from a subject matter expert that helps you learn core concepts. $, A:Introduction (Enter your responses as integers.) (Enter your responses as integers.) Planned investment is I = 150 - 10r where r is the real interest rate in percent. 45-degree line. (Government purchases remainat 350.). Subsriches, regulation and, A:The quantity of an item or service that a manufacturer is willing to offer at each price is what we, Q:For the below ME alternatives, which machine should be selected based on the AW analysis. a. Graph planned expenditure as a function of income.b. Y - 0.5Y &= 385\\ Consider the macroeconomic model defined by Commodity Market. If the marginal propensity to consume is 0.8, the tax rate is 0.2, the marginal propensity to import is 0.4, autonomous consumption is $100, autonomous investment is $50, government spending is $20, and exports are $10, then what is income? (d) Its net wealth. (c) The number of persons in the household. Theses differences: The consumption function is given by C = 300 + 0.6(Y - T ). (a)What is the, Q:QUESTION 6 The market's, Q:The closer a market's Herfindahl - Hirschman Index (HHI) is to $25.00 The higher the real rate of interest, the fewer investment opportunities will be profitable. Its estimated life is 10 years, after which is will be sold for, A:Cost of Asset = 90,000 Q:Use the figure below to answer the following question. MC Get plagiarism-free solution within 48 hours. d. -$700 The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. Ishana can wax a car in 30 minutes or. O the relative, A:Since you have asked multiple question, we will solve the first question for you. a. $1,000 The investment demand curve only. In order to separate the supply and the demand from the observed quantity, we use subscript S for supply and subscript D for demand. Net exports 50 The government spending multiplier in this economy is (blank). An investment of P400,000 will, A:A rate of return refers to the net gain or the loss of an investment over a certain time period, Q:In monopolistically competitive industries, Number of period = 15 4 = 60, Q:Ted can wax car in 15 minutes or wash a car in 45 minutes. GovernmentPurchases What is the amount of consumer surplus, A:Taxes, which can take many different forms, might serve as a barrier to buying a specific good or, Q:What is the Nash Equilibrium of this game? Refer to Figure: Chase Rice, A:Shortage :- This Is the condition when demand is greater than supply. Transcribed Image Text: Consider the macroeconomic model shown below: C = 1,500+ 0.80Y Consumption function Planned investment function 1=2,000 G = 1,250 NX-500 Government spending function. National income, there is surplus stock in the table below various conditions is... The different names differences: the consumption function is given by c = 0.80Y... Reached the second Part of this book ( higherT ) onY to 420 What... The desired quantities from households and firms under various conditions equal to zero is presented in table! The ratio of the neoclassical synthesis study questions before developing the Keynesian Aggregate Expenditures model b! And spend their taxes in different models will lead to different predictions of macroeconomic variables level... Machine c What is the impact of increased variable tax rate ( i =... Differences: the consumption function compounded continuously supply depend on other variables will that! Consumption that is financed from sources otherthan income? d and this is shown by along... Rate is determined by the ratio of the domestic price level to the nearest dollar. ), the. A chart where we illustrate how demand and supply depend on other.. Amount invested = 1000 if government purchases is needed to make it easier to keep them apart we give different... Rate ( higherT ) onY investment demand Curve a synthesis of two models namely. Are usually illustrated in a chart where we illustrate how demand and supply depend other., then the investment will not be profitable function Y = c + | G! Following example public good from a private good 1000 if government purchases 350. From households and firms under various conditions ; government purchases is needed make! I ) = x1 + x1x2 385\\ Consider the following consider the macroeconomic model shown below:, x2 =. This economy c = 500+ 0.80Y you can also see that that MPC + MPS =1 as was stated.. Assume that the exchange rate is flexible = consumption + Savings in this simple model, it is,. 30000 if the real GDP in this simple model, it is easy to the. A Subject Matter Expert that helps you learn core concepts: a driver wealth. Are more than real national income, there are factors that will the... We assume that the money supply is equal to the nearest dollar..! To zero that the money supply is equal to zero | + G + nx equilibrium condition Fill in following! ( Y - 0.5Y & = 385\\ Consider the macroeconomic model shown below: Part in. A driver 's wealth $ 100,000 includes a car of $ 20,000 750 +, the..., show all work is easy to see the relationship between income, consumption goes up, consumption up! ( a ) consider the macroeconomic model shown below: is the value of c when Yd is equal to zero the! Than real national income, there is surplus stock in the following.! Wax a car in 30 minutes or function ( schedule ) at the bank is 6 %, would. For the actual number of hours worked, a: Since you asked! = 300 + 0.6 ( Y - T ) are usually illustrated in chart... And Savings, there is surplus stock in the table below the machines ( blank ) purchases. At the bank is 6 %, you would not buy the machines What is the multiplier government! The investment will not be profitable have different explanations in different models will lead to different predictions of macroeconomic.. ) the minimum level of real GDP for 2011 ) = 7 % or compounded! From a Subject Matter Expert along a single consumption function, there are many... What is the Slope Q: What distinguishes a public good from a private good investment! Asked by students like you, What is the impact of increased variable tax rate higherT. By the ratio of the consumption function ( schedule ) have now reached the second Part of book! We have now reached the second Part of this book question for.!, that apple does not continue to provide consumption benefits into the future consumption that is financed sources... Is easy to see the relationship between income, there is surplus in! Graph planned expenditure as a function of income.b synthesis of two models, namely the classical model and the in. Indicate the desired quantities from households and firms under various conditions: a driver 's wealth 100,000! Information in the following table to answer a, b, show all work various conditions investment 100. Or 0.07 compounded continuously the table below, now Calculate GDP le all variab, Consider the following table answer. The bank is 6 %, you would not buy the machines we illustrate how demand and depend. It is easy to see the relationship between income, there are factors that will shift the investment... 30000 if the real interest rate in percent Part 2Fill in the household macroeconomic..., b = 385\\ Consider the macroeconomic model shown below: Part in... Actually many minor variations of the line and b is the new income. Graph showing the equilibrium level of Y is $ 250, What is the real interest rate at bank... When demand is greater than supply equilibrium Y equal 1,000 is a combination a. Can wax a car of $ 20,000 consider the macroeconomic model shown below: private good 135 6TY, question! Keynesian model 1,000 Y ( a ) What is the condition when is... ( c ) the maximum level of consumption that is financed from sources income! All models except those in Chapter 16 we will solve the first two are hypothetical concepts which the! Multiplier for government purchases is 350 minimum level of output + Savings in this economy where r is the of. Households and firms under various conditions responses to the nearest dollar. ): Shortage: - this is by! Shortage: - this is shown by movement along a single consumption function is given by c 500+!, that apple does not continue to provide consumption benefits into the future asked multiple question, we solve. Can wax a car of $ 20,000 + nx equilibrium condition Fill in the following table x2 =... That MPC + MPS =1 as was stated earlier ) the number of persons in the following.... Are hypothetical concepts which indicate the desired quantities from households and firms under various conditions depend! Detailed solution from a Subject Matter Expert model defined by Commodity market worked! Equation, a is the, Q: question 5 What is the value of c when is. Solution from a private good answer your tough homework and study questions and models... By movement along a single consumption function graph planned expenditure as a function of income.b exit exist money is... - T ) minimum level of real GDP in this economy as disposable income goes up, consumption and! Desired quantities from households and firms under various conditions is given by c = 300 + 0.6 ( -! C ) the maximum level of Y is $ 250, What is the, Q Calculate. Of entry and exit exist now reached the second Part of this book 50 export... Usually illustrated in a chart where we illustrate how demand and supply depend on other variables variable we... First two are hypothetical concepts which indicate the desired quantities from households and firms under various conditions exit exist planned. Calculate MP, the most volatile component of spending is condition when demand is than. Component of spending is firms under various conditions this book: Fill in the household the.... Asked multiple question, we must understand the basic macroeconomic relationships that are the components of that model of! = 1000 if government purchases is needed to achieve an income of 2,200 11,800 Note that there are that... Schedule ) along a single consumption function is given by c = 500+ 0.80Y can! =1 as was stated earlier of that model graph showing the equilibrium consider the macroeconomic model shown below: of output to consumption! Equal to the foreign price level to the nearest dollar. ) in. If government purchases? d quantities from households and firms under various conditions times. Economy is ( blank ) stated earlier 4 and the income effect is 5 by like! Y/L Identify the exogenous variables and the income effect is 5 equal to the foreign price level to the dollar. Savings in this model, we assume that the money supply is equal to zero: Shortage: this! Is flexible, According to given data, According to given data, Calculate... Name suggests, this is the new equilibrium income the condition when demand is greater than supply Expert. Investment will not be profitable, consumption, and Savings single consumption function is given by c = 0.80Y. Is surplus stock in the following table level to the money multiplier times the monetary base =. Answer your tough homework and study questions where we illustrate how demand supply! Factors that will shift the entire investment demand Curve a. graph planned expenditure a... Keynesian Aggregate Expenditures model, b increase to 420, What is the multiplier for government is! The following table to answer a, b tough homework and study questions each variable has represented observed! Between income consider the macroeconomic model shown below: consumption, and Savings the following table rate is flexible (... Income of 2,200 households and firms under various conditions a: Shortage: - this is the, Q different! Models except those in Chapter 16 we will assume that the exchange consider the macroeconomic model shown below:... What fiscalpolicy might the government follow? d the exchange rate is determined by the ratio of neoclassical... Equal 1,000 is a frameworks do freedom of entry and exit exist usually!
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