The economy is a closed economy. Interest rate, r, is held constant at 0.05 (5%) and prices are held fixed. The economy can be described by the following equations.
Consumption: C = 300 + 0.5YD; where YD = disposable income Investment:
I = 200 – 10(r – 0.05),
Government spending: G = 300
Taxes: T = 120 + .21Y
Transfers: TR = 100 - .04Y
What is the equilibrium level of output for this economy (rounded to the nearest unit)?
Find the equilibrium level of government saving.
The economy is initially in its equilibrium as shown in Question 3 (Part 1). Suppose firms become more optimistic about the future greater profit opportunities in the future and as a result, they decide to increase their investment. As a result, autonomous investment rises by 20%. What is the new equilibrium level of output after the change in autonomous investment?
This question continues with the change in autonomous investment that occurred above. As a result of this shock has the level of government savings changed? If so, has it gone up or down? Can you determine how much it changed by?
The economy is a closed economy. Interest rate, r, is held constant at 0.05 (5%) and...
The answer is here. Could you please explain question 19 and how was that 110 comes out? Thanks. Question 18 Question 20: In this question, interest rate and prices are held fixed, and the economy can be described by the income-expenditure model C 11000.6YD; IPlanned 300 500i, Consumption: Planned investment: where YD disposable income where i = 0.04 (i.e., 4% & it is held fixed) Таxes: T 280 Transfers Government spending: TR 100 G 160 Question 18 Compute for the...
Problem 3. The Crowding Out Effect. In a closed economy, the consumption function is C = 80+ 0.8YD – 20r, where Yd is disposable income, taxes Tx = 200 and transfers are Tr = 100. The investment function is I = 550 – 130r. Output is Y = 1000. Here the real interest rate is measured in percentage points (e.g. for r = 5% use 5 and not 0.05). (A) Find net taxes T and government spending G if the...
Consider a closed economy described by the following equations (all figures in millions of dollars): Y = C + + G Assume current value of output Y in this economy equals $8,000.00 Annual government expenditure equals $2,000.00 Current level of income tax is combination of flat Tax and income adjusted, based on following tax rate; 1,000 + .1(Y) Current annualized consumer spending equals to: 450 +0.75 (DI), were DI Disposable income = Income - Tax Current level of short term...
An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$: 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...
Fantasy Island is a closed economy and is characterized by the following equations: Consumption: C = 4000+ 0.75(Y-T) Investment: I = 2000 - 5000r Government spending: G = 3500 Budget surplus = 500 Real money demand: L = 0.4Y - 2500i, where i=r+ Expected inflation: Tº = 0 Production function: Y = 10 K12L 1/2 The nominal money supply = 7250 Note: Interest rates, i and r, are expressed in decimal points, i.e., ifr=0.5, then r = 50%. Suppose the...
1.Consider a closed economy with no taxes, whose consumption function, investment level & government spending level are given by the following equations: C= 5,000 + .80Y I= 9,000 G= 2000 whereGrepresents government spending. The equilibrium condition is, as always, that the value of the economy’s output (Y) must be matched by aggregate demand, but now aggregate demand contains a third element, G. a. What is the equilibrium level of aggregate output for this economy? b. What is the saving function for this...
1. Suppose in a simple closed economy with MPC = 0.75, the planned investment spending nas suddenly fallen, reducing AD and output to a level that below the natural level of output by 100 Million. Assume that the real interest rate is constant so that there is no crowding out of (gross) investment. (a) If the government decided to try to get the output back to the natural level of output using only a change in government spending (AG), by...
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.
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...
B,c,d,e please solve Suppose in the economy autonomous consumption - $100, autonomous investmen $120, government purchases G-$400 lump-sum taxes = $70, transfers Tr-$20, exports Er $150 autonomous imports im = $30, marginal propensity to consume mpc = 0.8, proportional income tax rate 1-20%, marginal propensity to invest mpi-0.1, and marginal propensity to imports mpm-0.4 (a) For this economy calculate (i) the amount of autonomous spending: (ii) the value of the spending multiplier; (iii) the equilibrium level of output; (iv) the...