940, 1000(d) 1080, 540(e) 2, 1084. Consider a closed economy with the following information given. We know that the total pro-duction of this economy is exactly 2000 units (Y=2000). Government expenditure is alsoknown and is 320 units (G= 320). The consumption expenditure function is:C = 20+0.8 x (YT),hence autonomous consumption is 20 units, while further consumption is a positive function ofthe disposable income (Y-T). Tax is a positive function of total incomeT = 0.15 x Y.Finally, the investment function is given as I =500 - 40 xr,hence autonomous investment is 500 units, while further investment is a negative function of thereal interest rate. Calculate the real interest rate in the equilibrium.5. Calculate the levels of consumption (C) and investment (I) based on your answers to problem(4).6. Now calculate private and government savings, based on your answers to problem (4) and (5).Show that total savings in the economy is equal to total investment at the market equilibriumreal interest rate.>>>

Above question provides a scenario of goods market equilibrium with a closed economy. Equilibrium…

-. Consider a closed economy with the following information given. We know that the total pro- expenditure is also duction of this economy is exactly 2000 units (Y= 2000). Government known and is 320 units (G= 320). The consumption expenditure function is:

-. Consider a closed economy with the following information given. We know that the total pro- expenditure is also duction of this economy is exactly 2000 units (Y= 2000). Government known and is 320 units (G= 320). The consumption expenditure function is:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Consider two economies (1 and 2) where in equilibrium, the level of aggregate income (Y) is the sum…

A: Aggregate income is the sum total of all the incomes in an economy without adjustments. As given in…

Q: 8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports…

A: Hope you got your answer :)Please do rate this helpful.....

Q: Consider the hypothetical country of Pelee. Suppose that national income in Pelee is $30 billion,…

A: In the given question we are given with,national income(Y)= $30 billiontax(t)= $10 billion,…

Q: 5. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so its…

A: A closed economy is an economic model that defines that there is no international trade or any…

Q: Part 1: Aggregate expenditure and Equilibrium output. Assume the following Consumption function (C)…

A: The marginal propensity to save (MPS) basically refers to the percentage of an increase in overall…

Q: In Altus, income rose by $80 billion over the past year. During the same period, its aggregate…

A: Here we calculate the MPE , MLR and multiplier by using the given information , so the calculation…

Q: Explain the effects of Covid-19 on private consumption since 2020. Show your own projection of…

A: Consumption: It refers to the process under which goods and services are purchased by the people.…

Q: 8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports…

A: Using the given information, the equilibrium level of income is:

Q: 3. If the consumption function is described by C= 0.01Y + 0.2Y+ 75 then what is the value of the…

A: Marginal propensity to consume is the proportion of the disposable income that a person wants to…

Q: In an economy, consumers spend 800 million regardless of their level of disposable income. In…

A: Meaning of Aggregate Demand Function: The effective elements in the determination of the level of…

Q: The graph shows the consumption function. Consumption expenditure (trillions of 2009 dollars) 12-…

A: The consumption function represents the functional relation between income and the consumption…

Q: 2

A: The aggregate demand curve shows the inverse relationship between two variables that are price level…

Q: Suppose a closed economy with no government spending which in equilibrium is producing an output and…

A: Remember the tax multiplier is less than the government spending multiplier. And we know that the…

Q: Examine the graph above. Suppose that government increases its spending, shifting the aggregate…

A: The total amount of expenditure done by the government on public works defines the amount of…

Q: 09. Consider the following model. Expenditure is given by: E=C+I+G The consumption function is…

A: The objective of the question is to find the correct representation of income as a function of…

Q: Suppose a closed economy has an aggregate consumption function given by +0.50Yd and generates $2200…

A: The total amount of money spent on consumption by households and individuals in an economy over a…

Q: Which of the following graphs shows the correct effect on the consumption function when taxes…

A: Macroeconomic research provides a comprehensive forecast for the fiscal landscapes of entire…

Q: a. If investment is x, draw the aggregate expenditure function (which depicts total consumption plus…

A: Consumption functionIt is closed economy with no government expenditure.Investment level is .

Q: Assume autonomous consumption is Gh¢ 400 million, autonomous investment is Gh¢ 300 million and…

A: i.) Equilibrium national income: Equilibrium national income can be calculated as follows: Thus,…

Q: Suppose that autonomous consumption is 2,190, government purchases are 590, taxes are 0, planned…

A: An autonomous spending depicts the parts of an economy's total use that are not influenced by that…

Q: Calculate autonomous consumption expenditure from the following date about an economy which is In…

A: The economic activities in an economy includes activities by different entities. These are…

Q: Consider the Savings-Investment model involving: The Savings function: S = S0+s1Y+s2r; and the…

A: S=S0+s1Y+s2r I=I0+ir (i) Equilibrium occurs when Savings equal Investment: S=I S0+s1Y+s2r=I0+ir…

Q: Assume you are 20 year old, with zero initial wealth, planning to work until the age of 50 and…

A: Under intertemporal hypothesis person earns money in his working age and consume that money in his…

Q: ppose that autonomous consumption is 50, government purchases are 125, planned investment spending…

A: Aggregate expenditure is the sum of consumption, investment, government spending and net exports in…

Q: Kim has taken a big step toward saving for her house. She has accumulated $56,750.00 for her down…

A: A government's purposeful efforts to influence economic growth are referred to as economic stimuli.…

Q: An economy has Aggregate Expenditure Function and Consumption Function given by: AE = 1200+ 0.5Y and…

A: Saving alludes to the demonstration of setting to the side a part of one's income or resources for…

Q: Suppose the marginal propensity to consume is 0.6 how much increase in the investment is required to…

Q: 16. Consider a closed economy with demand for goods as follows: • yd = C +I+ G C = 200 + 0.80(Y – T)…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Assume MPC is 0.9 and autonomous investment increases by $500 billion. What will be the impact on…

A: Marginal propensity to consume measures the magnitude of change in consumption expenditure due to…

Q: If the consumption function in an economy as follows C = 50 + 0.75Y and the following variables…

A: Given: Consumption function: C=50+0.75Y

Q: Given the following data on a simple closed economy: C= 10 +0.75 Y I = 20 G = 40 where C is…

A: Given information: C = 10 + 0.75Y ------------> Consumption function I = 20…

Q: Consider an economy in which autonomous consumption, planned autonomous investment, autonomous…

A: The GDP is $19000 and the MPC is 0.75. So, consumption will be: Consumption =GDP×MPCConsumption…

Q: 1. If a simple model of the macro economy is made in which the Marginal Propensity to spend is 0.65,…

A: The branch of economics that studies overall economic behavior is referred to as macroeconomics. It…

Q: By how much will consumption change if disposable income in the economy changes by -447?

A: Here C = 0.81(Yd) + $707.13 here the Yd is the disposable income 0.81 is the marginal propensity…

Q: Suppose that autonomous consumption is 1,200, government purchases are 1,500, planned investment…

A: Gross Domestic Product, sometimes known as GDP, is a measurement of an economy's size and the entire…

Q: The aggregate expenditures of the hypothetical country shown includes $2 billion in investment…

A: Investment (I) = $2 billion Government expenditure (G) = $3billion Export (X) = $1 billion Real GDP…

Q: Consider the Savings-Investment model involving: The Savings function: S = S0+s1Y+s2r; and the…

A: We are going to solve tow linear equations to find equilibrium GDP, Y* to answer this question.

Q: Suppose autonomous consumption in an economy is $3 trillion, the MPC is 0.8, government spending is…

A: GDP is the sum of consumption, investment, government spending and net export. This means, GDP = C…

Q: What are the four components of the Aggregate Expenditure Model (PAE)? O Savings, actual investment,…

A: Aggregate expenditure is the total spending on final goods and services in an economy. Aggregate…

Q: If autonomous expenditure is $1000, and the narginal propensity to consume is 0.6, what is the…

A: Autonomous expenditures are expenditures that are necessary and made by a government, regardless of…

Q: If the consumption function is C = $800 billion + 0.8Y, a. what is the MPC? __ b.…

A: We have given the following consumption function: C= $800 billion + 0.8Y Where C is consumption and…

Question

940, 1000
(d) 1080, 540
(e) 2, 108
4. Consider a closed economy with the following information given. We know that the total pro-
duction of this economy is exactly 2000 units (Y=2000). Government expenditure is also
known and is 320 units (G= 320). The consumption expenditure function is:
C = 20+0.8 x (YT),
hence autonomous consumption is 20 units, while further consumption is a positive function of
the disposable income (Y-T). Tax is a positive function of total income
T = 0.15 x Y.
Finally, the investment function is given as

I =
500 - 40 xr,
hence autonomous investment is 500 units, while further investment is a negative function of the
real interest rate. Calculate the real interest rate in the equilibrium.
5. Calculate the levels of consumption (C) and investment (I) based on your answers to problem
(4).
6. Now calculate private and government savings, based on your answers to problem (4) and (5).
Show that total savings in the economy is equal to total investment at the market equilibrium
real interest rate.
>>>

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Consider two nations, Spendia and Savia. The MPC for Spendia is 0.8, and the MPC for Savia is 0.5. Assume that both nations experience an increase in gross investment (1) of $150 million at their existing GDP levels. Instructions: In part a, enter your answers for changes in income as a whole number and multiplier answers to 2 decimal places. In part b, round your answers to 2 decimal places. a. Considering the multiplier effect, what will be the overall increase in income (Y) for each nation? The increase in income for Spendia is $ 100 million, describing an expenditures multiplier of The increase in income for Savia is $ 100 million, describing an expenditures multiplier of b. Now assume that a third nation experiences an increase of $375 million in its income and its gross investment (I) increases by the same amount as Spendia and Savia, which is $150 million. The expenditures multiplier of this third nation is suggesting an MPC of 0.45
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Suppose that equilibrium output in a closed economy is 1,680, consumption 1,260 and investment is 120. The marginal tax rate is zero. The marginal propensity to consume out of national income is 0.75. The level of government expenditure (G) is 1260 120 300
Find autonomous Expenditure from the following:- Autonomous consumption = $200 Marginal propensity to consume = 0.6 National income = $3000
A9
Find equilibrium level of national income from the following:- Autonomous consumption = $200 MPC = 0.8 Investment = $100 All the values are in million dollars
5:06 A & & & P M Page 4 of 5 QUESTION 4 The figure below shows the planned Aggregate Expenditure function for a hypothetical economy (AEp = 1,000 + 0.5 * Y). In this economy, taxes and transfers are equal to zero, so YD =Y. What is the value of unplanned investment expenditure (Iµ) when GDP = 3,000? Suppose that, next period, autonomous consumption increased by 100 and every thing else remained the same. Under these new circumstances, what would the value of unplanned investment be when GDP = 3,000? 5,000 4, 500 4, 000 3, 500 3,000 AEp = 1,000 + 0.5*Y 2, 500 2000 1, 500 1,a00 500 500 1,000 1, 500 2,000 2 500 3,000 3,500 4,000 4,500 5,000 REAL GDP Page 5 of 5 QUESTION A5 a. Suppose that some kind of significant economic event has occurred, and you learn that the event will de finitely cause the aggregate price level to decrease, but that its effect on short-run equilibrium real GDP cannot be determined without knowing the exact PLANNED AGGREGATE EXPENDITURE
Given, autonomous consumption Co = a = 4.0, marginal propensity to consume MPC = 0.80, investment | = 8.5, government expenditure G = 9.0, exports X = 1.5, imports M = 0.75, and taxes T = 0 ($, billion): i. What is the level of consumption and saving if income is 10.0? ii. What is the equilibrium output level YE (assume this is real GDP) for the economy?
Aggregate Expenditures and Multipliers Assignment a. Using the aggregate expenditure function above, what is the current level of real GDP? b. Using the aggregate expenditure function above, what would be the level of real GDP if the aggregate expenditure function shifted up by $0.2T? c. If Investment expenditures increase by $300B and MPC is equal to 0.90, what will be the increase in real GDP? d. If Government expenditures increase by $800B and MPS is equal to 0.05, what will be the increase in real GDP?
Calculate the value of consumption expenditure from the following:- National income = $6000 Autonomous consumption = $1000 Marginal propensity to consume = 0.80
Consider a closed economy without government Given C =100 + 0.8 Y and I = 80 a. Derive the AD function and solve for equilibrium income Y. b. What is the value of the expenditure multiplier? c..What is the equilibrium level of income?
Suppose there is a simultaneous increase in government spending (fiscal policy) and autonomous consumption, what would happen to consumption C. tax generation T and national income Y? C+ BT-bY = Co T-tY To -C+Y = Io + Go (National Income Equation) (Consumption Function) (Income-Dependent Tax)