2. Answer the following questions based on the information given below: Autonomous consumption = $10 billion; autonomous investment = $40 billion; autonomous government spending = $35 billion; autonomous exports = $20 billion; autonomous imports = $25 billion and marginal propensity to save = 0.4. mps = 0.4 mpc=0.6 a) Write out the consumption function using the above information. b) Graph the information above on the aggregate income and aggregate expenditure graph. c) Calculate equilibrium income/output. Please show your work. d) Show the equilibrium income/output on the graph.

2. Answer the following questions based on the information given below: Autonomous consumption = $10 billion; autonomous investment = $40 billion; autonomous government spending = $35 billion; autonomous exports = $20 billion; autonomous imports = $25 billion and marginal propensity to save = 0.4. mps = 0.4 mpc=0.6 a) Write out the consumption function using the above information. b) Graph the information above on the aggregate income and aggregate expenditure graph. c) Calculate equilibrium income/output. Please show your work. d) Show the equilibrium income/output on the graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy in which autonomous consumption, planned autonomous investment, autonomous government expenditure, autonomous taxes, and the marginal propensity to consume are given (there are no net exports). Autonomous consumer spending = $3,000 Ip = $5,000 G = $3,000 T = $4,000 MPC = .75 (a) What is the level of C when Y = $19,000? I need help to know how to calculate this.
Q1: Refer to the information provided in the Table below, answer the questions that follow: Aggregate Income ($billion) Aggregate Saving -100 150 -85 300 -70 450 -55 600 -40 a. What is the society's Marginal propensity to consume (MPC)? b. If MPC is constant, at income level of $900 billion, what would be the aggregate consumption level? c. What is the simple multiplier for this economy?
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Consider an economy described by the following equations. Y= C + I + GC= 100 + .75 (Y - T)I= 500 - 50rG= 125T= 100 Where: Y is GDP, C is consumption, I is investment, G is government spending, T is taxes and r is the rate of interest. Answer the questions based on the following equations above. a. What is the value of the multiplier? b. What is the equilibrium equation for Y? Show your solution. c. Suppose the Central Bank policy is to adjust the money supply to maintain the interest rate at 4 percent, so r=4. What is the value of output? Show your solution. d. Assuming that no change in fiscal policy, what is the effect of a reduction in interest rate from 4 percent to 3 percent on equilibrium output. Show your solution. e. In this case, explain the policy that was used by the policymaker to target the aggregate demand.
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a) The accompanying table shows gross domestic product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I-planned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AE-planned) and unplanned inventory investment (I-unplanned) b) What is the aggregate consumption function? c) What is Y*, income-expenditure equilibrium GDP? d) What is the value of the multiplier? e) If planned investment spending falls to $200 billion, what will be the new Y*? f) If autonomous consumer spending rises to $200 billion, what will be the new Y*?
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