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- What is constrains optimization, explain and discuss the significance of langrage multiplier.Assume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 + (0.1)(Y* - Y) YD = Y - TA + TR NXo = - 40 TA = (0.25)Y TRo = 50 How do I calculate the multiplier? Thank you.For the multiplier to be positive what condition must be satisfied?
- Assume an economy can be modeled with these equations: C = 210 + b Yd, I = 200, G = 103 - 0.054 Y, X = 280 M = 305 and T = -40 + 0.29Y. What is the value of b when the multiplier on Investment is 1.867? the answer is 0.73An economy is described by the following equations: Y = C + I, + G C = a + b(Y – T) T = tY %3D %3D Let a = 20,6 = 0.75, t = 0.25, I, = 100, G = 240 %3D (a) Determine the value of the multiplier for this economy, and find the equilibrium value of Y. (b) Find the values of C, T and G-T, given your answer to part (a). (c) Describe what would happen if the government tried to eliminate its budget deficit by undertaking a cut in G equal to the current value of G-T. HTML Editor B IUA A ▼ 回 深 D ¶ T 12pt Paragrap II13) All of the following are true statements about the multiplier except A) The multiplier makes the economy less sensitive to changes in autonomous expenditure. B) The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate. C) The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure. D) The larger the MPC, the larger the multiplier. 14) John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending, A) this may benefit the economy in the short run, but not in the long run. B) this will have a major negative impact on the economy in both the short run and in the long run. C) the economy will benefit in the short run and benefit by an even greater amount in the long run. D) this may benefit the economy in the long run, but could be counterproductive in the short run. 15) If an increase in…
- 6) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁+C₁YD Y₁ = Y-T I=b₁ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must (c₁ +b₁ ) satisfy? Explain your answers? b. Suppose that the parameter bo, sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? Why? What will happen to national saving?Calculate the value of MPC if the multiplier is given to be as 1.4C = 450 + 0.4YI = 350G = 150X = 70Z = 35 + 0.1YT = 0.15YYf = 1550Q.2.2 Calculate the size of the multiplier
