Suppose that the output gap in Country 1 is measured as -5000. What should be the increase in government expenditures in order to close the gap and make the economy to reach its potential level of GDP?
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- Your research into a nation has yielded the following Information: Autonomous expenditure (A) = $300 Gross Investment (1) = $200 Government purchases (G) = $300 Net exports (NX) = $225 Taxes (T) = $300 MPC=0.75 Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. Substitute the values above into the equation: AE=A+ [MPC × (Y-T)] +1+G+NX to determine the abbreviated equation for aggregate expenditures (AE). AE= Y b. Knowing that AE - Y at the equilibrium level of output, what is the equilibrium level of output for this nation? Ye: $ c. What is the tax multiplier for this economy? d. If taxes decrease by $40, from $300 to $260, what is the new equilibrium level of output? Ye: $ e. With this new tax level of $260, the government will O have enough tax revenue to pay for all its imports. O collect more in taxes than it spends on government purchases. O not tax businesses enough. • spend more on government purchases than…Q1: There are two equations for macroeconomic equilibrium in an economy. State them. Show (mathematically) that Savings equals Investment when expenditure equals income. What type of economy would you have when exports equal imports? What happens to the savings-investment relationship if exports are not equal to imports? [This can be greater than or less than]. [Hint: See video lecture on Open Economy Macroeconomics]. Note: Ensure to write out full meanings when you use abbreviations or short forms. This is key to getting full marks.Tariff Tariff x flexible labor law Excerpt from table 8 in Topalova (2010). The dependent variable is a consumption measure. 1.126** (0.545) -1.719* (0.922) Question 3 10.0 points possible (graded, results hidden) Above is the excerpt from table 8 in Topalova (2010)'s paper on the effect of trade liberalization in India. It shows effects on consumption of an increase in the variable "Tariff" in the first row, and of the interaction between "Tariff" and "flexible labor law" in the second row. For the definition of Tariff, remember Topalova's paper as discussed in class. You are not required to understand how exactly "interaction terms" work, just note that economists use interaction terms to capture how the main effect changes due to a change in another variable. In this case, "Tariff x flexible labor law" thus captures how the effect of "Tariff" as depicted in the first row changes when a district has flexible labor laws instead of inflexible ones. Which of the following is correct?…
- Given the following model of an Economy as follows:- (10 marks) C = 50 + 0.7 Yd (Yd = Y-T) (Consumption & Expend) I = 100 (Investment Expend) X = 20 (Exports ) M = 10 – 0.27 (Imports) T=25 interepret the consumption Function i) Determine Equilibrium level of National Income ii) Consumption level at Equilibrium level of Income iii) Total import at equilibrium IncomeSuppose that the economy is characterized by the following behavioral equations: C = 180 + 0.7OY, | = 150 G = 190 %3D T= 120 a.) Equilibrium GDP (Y) = b.) What is the level of disposable income (YD)? (Round your response to two decimal (Round your response to two decimal places) places) c.) What is the level of consumption spending? (Round your response to two decimal places)Assume that a nation's marginal propensity to consume (MPC) is 0.75. A highiy productive, cost-cutting technology is developed for the production of commercial airplanes. The total industry expenditure in this nation is $100 million for the immediate acquisition and adoption of this technology. (a) For this nation, identify and explain how much this spending on new technology will change each of the following in the first round: i. Income (GDP) L. Saving i. Consumption (b) Assuming a closed economy and no leakages, identify and explain how much this spending on new technology will change each of the following at the end of the final round: i. Income (GDP) ii. Saving li. Consumption
- In February 2020, 15,300 people were employed, 2,700 were unemployed, and 7,000 people were not in the labor force. During March 2020, 160 people lost their jobs and didn't look for new ones, 140 people quit their jobs and retired, 800 unemployed people were hired, 100 people stopped looking for jobs and quit the labor force, and 700 people entered the labor force to look for work. a. Calculate for February 2020 i. The unemployment rate ii. The employment-to-population ratio b. Calculate for the end of March 2020 i. The number of people unemployed ii. The number of people employed iii. The unemployment rateProblem 1 Suppose the system of aggregate expenditures can be described by the following relationships and parameter values. C(Y – T) = 1200 + 0.8 (Y – T) I(r) = 100 – 3r G = 200 ;T = 200; r = 5; Ex = Im = 0 %3D 1. Find the equilibrium value ofY (output/income) in this model. Let this level of production be the economy's potential GDP (Y;).Suppose the United States economy is represented by the following equations: Z = C + I + G C = 500 + .5YD T = 600 I = 300 YD = Y - T G = 2000 Given the above variables, calculate the equilibrium level of output. Now, assume that taxes increase from 600 to 700. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
- 3. Suppose that you are interested in answering the question of how consumption reacts to tax increases. In recent years, government has imposed tax increases to fund increased infrastructure spending. If you could design an ideal experiment to answer this question, how would you do so? Do you think it would be practical to use this experiment on a large scale?For this problem set, we're going to keep things simple. Be sure to watch the lecture before completing this. Please use the following information and the following model from your book (and the lecture) to calculate Y (aggregate incomes in an economy). BE SURE TO SHOW YOUR WORK (It's the reason I made this a problem set instead of a quiz) Y=C+1+G C= Co + C;(Y-t) Total spending in a small society: Household spending on medicine: $4,000 Household spending on food: $1,000 • Household spending on recreation and entertainment: 20% of income • Household spending on clothing: 15% of income • Household spending on art: 40% of income • Business investment on product lines: $10,000 • Business investment on equipment: $1,500 • Government spending on national defense: $3,600 • Government spending on roads: $2,000Consider an economy that is characterized by the following equations: C= 400 + 0.5 Yd I = 700 - 4000i + 0.1y G= 200 T= 200 (M/P)d - = 0.75Y - 7500€ (MP)== 600 What is the equilibrium consumption (C)?