HomeworkLib
Question

Consider the model of an economy given by the following equations. Consumption: C=50+0.7YD Investment: I=75 Government...

Consider the model of an economy given by the following equations.
Consumption: C=50+0.7YD
Investment: I=75
Government Purchases: G=100
Net Tax Revenue: T=0.2Y
Exports: X=50
Imports: IM=0.15Y

e) What is the simple multiplier in this model?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer

simple multiplier =1/(1-MPC)

MPC=0.7=coefficient of YD in the consumption funtion

Simple multiplier =1/(1-0.7)

=3.33333333

The simple multiplier is 3.33

0 0
Add a comment
Know the answer?
Add Answer to:
Consider the model of an economy given by the following equations. Consumption: C=50+0.7YD Investment: I=75 Government...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, governm...

    Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending and taxes are given by: C = co + ci(Y-T), I = 7, G=G, and T=1 Imports and exports are given by: Q = my and X = rY* where asterisk denotes a foreign variable. a) Solve for equilibrium income in the domestic economy, given Y*. What is the multiplier in this economy? If we were to close the economy (so...

  • A simple Macro economy economic model is presented by the following information: Consumption expenditure = 1200...

    A simple Macro economy economic model is presented by the following information: Consumption expenditure = 1200 + 0.9YD Disposable Income (YD) = Y – NT Net Taxes = 100 + 0.05Y Investment Spending = $600 million; Government Spending = $500 million Exports = $400 million ;   Imports = 300 + 0.1Y What is the equilibrium real GDP.                                                                                                                                                           If the full employment is at $8000, calculate the recessionary or inflationary gap? Calculate the government expenditures multiplier. Calculate the amount...

  • Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function

     5. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T is for net taxes: C= 20 + 0.75 x (Y - T) Suppose G = $35 billion, 1 = $60 billion, and T = $20 billion. Given the consumption function and the fact that, in...

  • Consider two open economies in which the real exchange rate is fixed and equal to one....

    Consider two open economies in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, taxes, imports and exports are given by equations below for each economy. Variables with * denote values for the foreign economy. Domestic Economy: C= 12 + 0.8 (Y-T) I= 8 G= 10 T=11 IM= 0.2Y EX= 0.2Y* Foreign Economy: C*= 12+ 0.8 (Y*-T*) I*=8 G*=10 T*=11 IM*= 0.2Y* EX= 0.2Y a) Solve for the equilibrium output in the domestic economy,...

  • 1. Given the following parameters of an economy, Consumption=120+0.75Yd, Taxes=40+0.2Y, Investment=230, Government Expenditure=560, Exports=350 snd Imports=30+0.1Y....

    1. Given the following parameters of an economy, Consumption=120+0.75Yd, Taxes=40+0.2Y, Investment=230, Government Expenditure=560, Exports=350 snd Imports=30+0.1Y. a) Express Consumption Function in terms of Y b) Calculate Equilibrium national income c) What is the gradient of the expenditure function d) What is the value of the multiplier

  • 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...

  • Consumption spending in a country is represented by C = 1800+ 0.8(Y-T). Planned investment is 900,...

    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. 1. Write down planned aggregate spending of the economy as a function of Y. Zero points if you do not show your work. (3) 2. An important trading partner of the country goes through a major recession, decreasing the country's net exports by $500. Ure the Keynesian AE model to...

  • 1. Consider an economy where aggregate expenditures can be characterized by the following information: household consumption...

    1. Consider an economy where aggregate expenditures can be characterized by the following information: household consumption C = 100+ 0.8Yd, investment expenditure 1 = 100, government expenditure G = 300, exports X = 300 and imports IM = 0.14Y. Suppose that the income tax rate is 20%, and that the government has no initial debt, so that D = 0. (a) Solve for the AE function and the equilibrium level of national output Y. (b) Solve for the government's budget...

  • 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...

  • Consumption: ?? = 4 + 0.5(? − ?) Investment: ?? = 4 + 0.2? Government expenditure:...

    Consumption: ?? = 4 + 0.5(? − ?) Investment: ?? = 4 + 0.2? Government expenditure: ? = 30 Tax revenue: T = 0.2? Exports: ? = 7 Imports: ? = 0.02 ? where Cd is consumption on domestically produced goods (remember: total consumption, C=Cd +M), Y is domestic output, G is government expenditure, M is imports, IP is planned investment spending, X is exports, and T is tax revenue. (i) Derive the equation for planned aggregate expenditure (PAE) on...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT