II Analytical 4. Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500+0.6(YT). Taxes (T) are equal to 600. Government spending is equal to 1,000. Invest- ment is given by the equation I = 2160-100r, where r is the real interest rate in percent. What is the equilibrium real interest rate? [Show your steps]
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- Assume that GDP (Y) = 5,000 Consumption: C = 1,300+(0.4(Y-T)) - 240 r; where r is the real interest rate. Investment (1) is: /= 1,800 - 240 r, Taxes (7): T=250 Government spending (G): G= 1,800 a. What are the equilibrium values of C, Number I, Number and r Number b. What are the values of private saving Number public saving, Number and national saving NumberAssume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by the equationC = 1,200 + 0.6(Y −T)−100r, where r is the real interest rate, in percent. Investment (I) is givenby the equation I = 2,000 − 200r. Taxes (T) are 1,000, and government spending (G) is 1,500.(a) What are the equilibrium values of C, I, and r? (b) What are the values of private saving, public saving, and national saving? (c) For the given consumption function, what does the relationship between consumption and theinterest rate imply about the saving schedule?(27) What are the effects of capital destruction on other macro variables, including con- sumption (C), saving (S), investment (I), net exports (NX), loanable funds (L), real balance (m= M/P), real interest rate (r), nominal interest rate (R), real rental (rk), and nominal rental (R)? Please "circle" the effects on these variables on a table of the following form for the short run and the long run separately. macro variable consumption (C) saving (S) investment (I) net exports (NX) loanable funds (L) real balance (m= M/P) real interest rate (r) nominal interest rate (R) real rental (r) nominal rental (R₂) (a) (b) (c) (d) rise fall constant ambiguous ambiguous rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant rise fall constant ambiguous rise fall constant ambiguous ambiguous ambiguous ambiguous ambiguous ambiguous ambiguous your answer
- 2. Assume a closed economy where the consumption, investment, and government expenditure are C = 350 + 0.3Y; | = 120 - 40r; G = 120 II What is the value of real interest rate which clears the good market when Y (income ) equal to $ 600. Hint (find IS equation first) * 5.5 5.6 4.25 5.9Mathematical economics: For an economy the following consumption function is given : C = 60+0.75 Y. %3D (a) If investment in a year is $35 crores, what will be the equilibrium level of income or output ? (b) If full-employment level of income (i.e., level of potential output) is $460 crores, what investment is required to be undertaken to ensure equilibrium at full employment ?Question 32 $75 150 225 Investment (5) O $150 Ⓒ$225 O $50 Price Level O $100 H Refer to the graphs, in which the numbers in parentheses near the AD₁, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. What is the desired level of investment spending in this economy if it is to achieve a noninflationary, full- employment level of real GDP? Investment Demand Q₁ Real GDP $50 100 150 Investment (5) AD, ($150) AD, ($100) AD, (550) 1p
- An economy has full-employment output of 9000, and government purchases are 2000. Desired consumption and desired investment are as follows: Find desired national saving for each value of the real interest rate. Enter your answers in the table below. Real Interest Rate (%) 2 3 4 5 6 (Enter your answer as a whole number.) Desired Consumption 6100 6000 5900 5800 5700 Desired Investment 1500 1400 1300 1200 1100 If the goods market is in equilibrium, what are the values of the real interest rate, desired national saving, and desired investment? r= %. (Enter your answer as a whole number.) so = Desired SavingAn economy has full-employment output of 9000, and government purchases are 2000. Desired consumption and desired investment are as follows: Real Interest Desired Desired Rate (%) Consumption Investment 2 6100 1300 6000 1200 4 5900 1100 5 5800 1000 6 5700 900 If the goods market is in equilibrium, what are the values of the real interest rate, desired national saving, and desired investment? r = %. (Enter your answer as a whole number.) (Enter your answer as a whole number.) %3DASAP
- Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.In a hypothetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Investment Demand Curve 14 Tools 12 investment de 10 8. 6. 4. 40 80 120 160 200 240 280 Investment (2017 $ million) b. If the real interest rate is 6% then $ million of investment will take place in this economy. c. If the real interest rate rises to 4% then investment (Click to select) V to $ million. Real Rate of Return and Interest (%)1. Suppose that the economy can be described by the following equations: C= 400 + (8/9)*DI I= 300 G= 800 T=(1/2)*Y (X -М) 3 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept? b. Find the equilibrium level of output. c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending. ii) Calculate the new equilibrium level of income. iii) Calculate the change in income and compare to the increase in government spending. Comment. iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar. v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv). Now G assumes its original value of G = 800. d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level…