Consider the simplest macroeconomic model, with a closed economy and no government. If we assume that...
Consider the simplest macroeconomic model, with a closed economy and no government. If we assume that desired investment is autonomous with respect to national income, then the investment function (which graphs desired investment against actual national income) will be
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positively sloped and relatively flat. |
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positively sloped and relatively steep. |
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vertical. |
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negatively sloped. |
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horizontal. |
Homework Answers
The answer is option e- Horizontal
Consider the simplest macroeconomic model, with a closed economy and no government. If we assume that desired investment is autonomous with respect to national income, then the investment function (which graphs desired investment against actual national income) will be horizontal
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Consider the simplest macroeconomic model, with a closed economy
and no government. If we assume that...
4) Consider the following information describing a closed economy with no government and where aggregate output...
4) Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions 1. the equilibrium condition is Y=C+1 2. the marginal propensity to consime is 0.90 3. the autonomous part of C is $300 investment is autonomous and is $100 Refer to the information above. The equilibrium level of national income (Sbillions) will be A) $3600 B) $4000. C) $3000. D) $3900 E) $4400.
The closed economy model with government is considered. We observe following values of autonomous expenditures: Co...
The closed economy model with government is considered. We observe following values of autonomous expenditures: Co = 150, Io = 50, Go = 100, To= 50. Marginal propensity to consume equals 0.8, investment sensitivity parameter equals 5 and income tax rate equals 20%. Using this information find IS curve and derive it graphically.
Consider a closed economy operating according to the Classical model. The production function is: Y =...
Consider a closed economy operating according to the Classical
model. The production function is: Y = 40K^0:75L^0:25
Problem 1- Use the following information o answer questions 24 29 Consider a closed economy operating acoording to the Classical model. The production function is: 40K0.75し0.25 where K and L are the capital and labor used in the production of output Y The consumption and investment functions are: C 100 +0.8(Y-T) 1 = 1,450-20r where T is the amount of taxes and r...
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...
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...
(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?
Modell deals with the simplest possible conditions of a closed economy (no exports or imports) with no government,...
Modell deals with the simplest possible conditions of a closed economy (no exports or imports) with no government, no corporate savings, and no induced investment In this economy Yo = Y; C = 60+ (9/10) Y 1 = 40. Use this information to complete the table below, and write in answers to questions 1-5. Total Output (GDP) Yo C Total Demand C+1 800 800 780 820 900 900 870 910 1000 1000 1100 1100 1050 1090 1200 1200 1140 40...
3. (8 points) Consider the long-run model of a closed economy with a marginal propensity to...
3. (8 points) Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8. Suppose the government cuts taxes by $100 billion while holding government purchases constant. What happens to the following variables? Explain and calculate the amount of change for each variable. a. Public saving (Sg) b. Private saving (Sp): c. National Saving (S): d. Investment (1)
(i) Consider a closed economy without government. Assume that a constant of profit (Π) is saved...
(i) Consider a closed economy without government. Assume that a constant of profit (Π) is saved and that no wage (?) is saved. Using the Keynesian income-expenditure accounting, derive the so called ‘profit multiplier’ and explain the main determinant of the size of the profit multiplier. (ii) Now introduce the government sector in the above model and let ? and ? represent government expenditure and revenues respectively. Derive the profit multiplier for this case and discuss the relation between fiscal...
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...
4) Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions 1. the equilibrium condition is Y=C+1 2. the marginal propensity to consime is 0.90 3. the autonomous part of C is $300 investment is autonomous and is $100 Refer to the information above. The equilibrium level of national income (Sbillions) will be A) $3600 B) $4000. C) $3000. D) $3900 E) $4400.
Consider a closed economy operating according to the Classical
model. The production function is: Y = 40K^0:75L^0:25
Problem 1- Use the following information o answer questions 24 29 Consider a closed economy operating acoording to the Classical model. The production function is: 40K0.75し0.25 where K and L are the capital and labor used in the production of output Y The consumption and investment functions are: C 100 +0.8(Y-T) 1 = 1,450-20r where T is the amount of taxes and r...
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...
(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?
Modell deals with the simplest possible conditions of a closed economy (no exports or imports) with no government, no corporate savings, and no induced investment In this economy Yo = Y; C = 60+ (9/10) Y 1 = 40. Use this information to complete the table below, and write in answers to questions 1-5. Total Output (GDP) Yo C Total Demand C+1 800 800 780 820 900 900 870 910 1000 1000 1100 1100 1050 1090 1200 1200 1140 40...
3. (8 points) Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8. Suppose the government cuts taxes by $100 billion while holding government purchases constant. What happens to the following variables? Explain and calculate the amount of change for each variable. a. Public saving (Sg) b. Private saving (Sp): c. National Saving (S): d. Investment (1)
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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