1. (a) The following equations describe an economy:C-100+ 0.75YdI-50-25rT-G-50Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I istaxes, G is government purchases and r is the rate of interest. Derive the IS curve for theeconomy. Show the area of excess demand and excess supply in the goods market.(b) Draw the graph and explain the derivation of IS curve.2. (a) Given the following data about the monetary sector of the economy:Ma -0.4Y-80rM₁ - 1200 millionWhere, Ma is demand for money, Y is the level of income, r is the rate of interest andM, is the supply of money.Derive the equation for LM curve and give the economic interpretation of this curve.Show the excess demand and excess supply in the money market.(b) Draw the graph and explain the derivation of LM curve.3. Consider the following economy:C-100+ 0.8YdI-50-25,G-T-50M'P-200M₁-Y-25r1. Calculate the IS and LM curves.2. Calculate the equilibrium levels of output (national income) and interest and draw the graph.CS Scanned with CamScanner

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1. (a) The following equations describe an economy: C-100 +0.75Yd 1-50-25r T-G-50 Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I' is taxes, G is government purchases and r is the rate of interest. Derive the IS curve for the economy. Show the area of excess demand and excess supply in the goods market. (b) Draw the graph and explain the derivation of IS curve.

1. (a) The following equations describe an economy: C-100 +0.75Yd 1-50-25r T-G-50 Where C is aggregate consumption, Y is disposable income, I is aggregate investment. I' is taxes, G is government purchases and r is the rate of interest. Derive the IS curve for the economy. Show the area of excess demand and excess supply in the goods market. (b) Draw the graph and explain the derivation of IS curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Quèstion 4 "As disposable income increases, consumption:" O And saving both increase. O Decreases and saving increases. O And saving both decrease. O Increases and saving decreases.
This problem has been solved! See the answer Explain the relationship between the aggregate expenditures model in graph (A) below and the aggregate demand–aggregate supply model in graph (B) below. In other words, explain how points 1, 2, and 3 are related to points 1’, 2’, and 3’.
1. Tbe economy's income and expenditure The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Markets for Goods and Services Firms Households Markets for Factors of Production Based on this model, households earn income when purchase in markets for factors of production. Suppose Megan earns $575 per week working as a d households Hedical Clinic. She uses $8 to get her car washed at Spotless Car Wash. Spotless Car Wash pays Larry $325 per week to wash cars. Larry firms ourchase medical services from the Medical Clinic. Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services. Market for Factors of Production Market for Goods and Event Services Megan earns $575 per week working for the Medical Clinic. Larry spends $225…
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(11) The slope of the consumption function is the __________________________ __________________________ __________________________.
3. Categories of expenditures Dmitri and Frances Doherty live in Conshohocken, PA. Their son, Jake, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (1), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Dmitri's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. The Pennsylvania Department of Transportation, a state administration, fixes potholes along PA highway: 23, which feeds into the center of Conshohocken, Frances gets a new video camera made in the United States. Dmitri buys a sweater made in Guatemala. Jake buys a new set of tools to use in his plumbing business. с 00 I O O G O X 0 M O O 0 000 00 000 000
2. The circular-flow model The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income when purchase in factor markets. Suppose Maria earns $775 per week working as a doctor for the Medical Clinic. She uses $8 to have breakfast at Dinah's Diner. Dinah's Diner pays Kevin $475 per week to work as a short-order cook. Kevin uses $250 to purchase medical services from the Medical Clinic. Identify whether each of the following events in this scenario occurs in the factor market or the product market. Event Factor Market Product Market Kevin spends $250 to purchase medical services from the Medical Clinic. Maria spends $8 to have breakfast. Kevin earns $475 per week working for Dinah's Diner.…
3. Categories of expenditures Shen and Valerie Ferrari live in Swarthmore, PA. Valerie's father, Antonio, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Shen's employer upgrades all of its computer systems using U.S.-made parts. Valerie gets a new video camera made in the United States. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. Valerie's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. Shen buys a bottle of Italian wine. OOOoo 0 I 00000 G 00 000 X 00000 M OC 0 0 0 0
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2. From what was learned in class, explain what the values of the slope and vertical intercept of the aggregate consumption function mean from an economic perspective. Income-expenditure equilibrium Using the data in the following table to complete the following questions. GDP YD Planned (billions of dollars) $0 $0 $200 $100 400 400 500 100 800 800 800 100 1,200 1,200 1,100 100 1,600 1,600 1,400 100 2,000 2,000 1,700 100 2,500 2,500 2,000 100 3,000 3.000 2,300 100 1. Complete the columns for AEPlanned and unplanned in the table. 2. What is the value of the MPC? 3. What is the aggregate consumption function? AE Planned Unplanned 4. What is the equation for the planned aggregate expenditure function? 4. 5. What is the value of income-expenditure equilibrium GDP, (Y*)? 6. Explain in economic terms what happens when not in the income-expenditure equilibrium? Both when GDP > AE planned and GDP < AE planned. For each situation what needs to happen to move the economy toward equilibrium?.
Consider the following economy. What is the mpc in this economy? Planned Government Net Exports Aggregate Change in Real GDP (Y) Consumption (C) Investment (I') Purchases (G) (NX) Expenditures (AE) Inventories 10000 8200 800 11000 9000 600 12000 9800 13000 14000 15000 800 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 0.50 b 0.75 C 0.80 d 0.90
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