Consider the imaginary small country of Torngat. Assume that Torngat is closed to trade, so that its net exports are equal to zero. Suppose that the economy is described by the following consumption function, where C is consumption, Y is income (real GDP), Ip is planned investment, Gis government purchases, and T is taxes: C= $40 billion +0.5x (Y-T) Suppose G = $115 billion, Ip= $50 billion, and T = $10 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y = C + Ip + G, the equilibrium income level is S billion. Suppose that government purchases are increased by $100 billion. The new equilibrium level of income will be equal to S Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to billion.

Consider the imaginary small country of Torngat. Assume that Torngat is closed to trade, so that its net exports are equal to zero. Suppose that the economy is described by the following consumption function, where C is consumption, Y is income (real GDP), Ip is planned investment, Gis government purchases, and T is taxes: C= $40 billion +0.5x (Y-T) Suppose G = $115 billion, Ip= $50 billion, and T = $10 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure can be calculated as Y = C + Ip + G, the equilibrium income level is S billion. Suppose that government purchases are increased by $100 billion. The new equilibrium level of income will be equal to S Based on the effect of the change in government purchases on equilibrium income, you can tell that this economy's multiplier is equal to billion.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

See similar textbooks

Similar questions

Consider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the economy of this country in billions of dollars, where C is consumption, DI is disposable income, I is investment, and G is government purchases: C� = = 30+0.8×DI30+0.8×DI G� = = 5050 I� = = 6060 Initially, this economy had a lump sum tax. Suppose net taxes were $50 billion, so that disposable income was equal to Y – 50, where Y is real GDP. In this case, this economy's aggregate output demanded was ___________ . Suppose the government decides to increase spending by $10 billion without raising taxes. Because the spending multiplier is ____________ , this will increase the economy's aggregate output demanded by ____________ . Now suppose that the government switches to a proportional tax on income of 10%. Because consumers retain the remaining 90% of their income, disposable income is now equal to 0.90Y. In this case, the economy's aggregate output…
Suppose that a vaccine manufacturing company owned entirely by U.S. citizens opens a new facility in Canada. Answer all three parts below. In each case, carefully explain your answer. a) What sort of foreign investment would this represent? b) What would be the effect of this investment on current Canadian Gross Domestic Product (GDP) and U.S. GDP? c) What would be the effect of this investment on future per capita incomes in Canada?
The U.S. economy relies heavily on international trade. Choose two transactions at random that result from international trade; one where purchases are made from another country and one where the U.S. sends a product to another country. Identify the impact of each of these on imports, exports, net imports, and net exports at the time the transaction takes place. For example, if you purchase a product online that is made in and shipped from Italy to you in the United States what is the effect on the U.S. economy in these four categories at the time of the transaction? In addition, there has been a lot of news in recent years surrounding tariffs. Exactly what is a tariff and what is the impact of tariffs on international trade? Who pays the cost of tarffs?
If Korean exports to the U.S. decline by $15 billion, by how much will total Korean spending drop if their MPC is 0.60?
1) https://openstax.org/books/principles-macroeconomics-2e/pages/20-1-absolute-and-comparative-advantage 2) https://openstax.org/books/principles-macroeconomics-2e/pages/20-2-what-happens-when-a-country-has-an-absolute-advantage-in-all-goods 3) https://openstax.org/books/principles-macroeconomics-2e/pages/20-4-the-benefits-of-reducing-barriers-to-international-trade please I need a short summary of these articles
National Saving - Investment = X - IM A country whose National Saving is greater than its Investment will experience a Trade deficit (IM > X) Balanced trade (IM – X) = 0 O Trade surplus (X > IM)
If a country's economic data shows private savings of $400 million, government spending of $250 million, tax revenue of $400 million, and a trade surplus of $175 million, then what does investment equal? (Enter 1 for 1 million)
Consider an economy (with no international trade) in which the price level is constant where C = 500 + .8DI, I = 600, G = 500, and T = 500. What is the equilibrium level of GDP?
The trade feedback effect shows that A 50 million dollar increase in U.S. exports results in a 30 million dollar decrease in German imports. A 100 million dollar increase in U.S. imports results in a 50 million dollar decrease in French imports. A 100 million dollar increase in U.S. imports results in a 70 million dollar increase in U.S. exports. A 1 billion dollar increase in U.S. GDP increases U.S. net exports by 100 million dollars.
Q1. Assume that a country produces two goods, agriculture (which requires land and labor) and manufactured goods (which requires labor and capital), and is currently in autarky equilibrium. The country just finds that the international price ratio of agriculture relative to manufactured goods, i.e., PA/PM, in the world market is higher than the price ratio in its domestic market. Should this country trade? If so, which product should it export? Will it gain from trade? Illustrate your answer graphically using production-possibilities frontier (PPF) and indifference curves. In the same graph, identify the trade triangle, including export and import quantities. How will the size of the trade triangle, i.e., the levels of export and import quantities, in the above question change when PA falls in the world market? Illustrate your answer graphically. How will the nominal wage rate in this country be affected by trade? What about real wages? Illustrate your answer graphically. Your…
An economy is said to be closed economy, when: a) Saving exactly equals investment at full employment b) Imports exactly equal exports, so that trade is balanced c) Domestic firms invest in industries overseas d) The home economy is isolated from foreign trade.
An expected decline in demand for consumer goods in the U.S. means there will be less imports into the U.S. Less imports in the U.S. translates to a reduction in exports from China, which is significant as the U.S. has the largest GDP of all nations. As the U.S. is reducing imports, it will be purchasing less goods from China, which means the U.S. will be giving up less dollars to purchase Chinese goods with the yuan. Will a decline in demand for consumer goods in the U.S. impact China's economy given the above information? If so, how would that affect the dollar-yuan exchange rate?