Assume the following economy: Autonomous Consumption = £10,000; Marginal Propensity to Consume = 0.8; Business Investment = £30,000 1. Find the equilibrium size of income Y and the size of the Multiplier of Business Investment  Assume now that a government sector is introduced, while business investment is still I=£30,000. Government spending injects G=£50,000 into the economy. However, in order to finance its expenditure, the government levies an income tax at a rate of 25%. 2. Find the new equilibrium size of income and calculate the size of the Multiplier of Business Investment Identify whether the government balance is balanced or not when I=30,000 and G=50,000

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Economy B has a marginal propensity to consume of 0.7, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Suppose there is an increase in autonomous investment of $5 billion in each of these economies. Which of the following statements is true? Select one: O A. The AD curve shifts farther to the right in Economy A than Economy B. O B. The AD curve shifts to the left the same amount in both economies. O C. The simple multiplier is larger in Economy A. O D. The AD curve shifts to the right the same amount in both economies. O E. The AD curve shifts farther to the left in Economy B than Economy A.

Suppose the consumption function is given by C(Y)=60+0.8(Y-T) where Y represents output and T stands for net taxes. Suppose further that the level of investment, I, is 400, the level of government expenditure, G, is 300, and net taxes, T, are 200.   What is the value of the marginal propensity to save?   a. 5   b. 0.2   c. 0.8   d. 1

What will the multiplier be when the MPS is 0, 0.4, 0.6, and 1? What will it be when MPC is 1, 0.90, 0.67, 0.50, and 0? How much of a change in GDP will result if firms increase their level of investment by 8 billion and the MPC is 0.80? If the MPC instead of 0.67?

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.3 and a marginal propensity to import of 0.3. Economy B has a marginal propensity to consume of 0.9, a net tax rate of 0.1 and a marginal propensity to import of 0.3. Suppose there is an increase in autonomous investment of $5 billion in each of these economies. Which of the following statements is true? Group of answer choices There is a larger decrease in real GDP in Economy A as a result of the change in autonomous investment. There is a larger increase in real GDP in Economy B as a result of the change in autonomous investment. There is a larger increase in real GDP in Economy A as a result of the change in autonomous investment. There is an equal effect on real GDP in Economies A and B as a result of the increase in autonomous investment. There is a larger decrease in real GDP in Economy B as a result of the change in autonomous investment.

Consider a hypothetical closed economy in which households spend $0.80 of each additional dollar they earn and save the remaining $0.20. The marginal propensity to consume (MPC) for this economy is Suppose the government in this economy decides to increase government purchases by $400 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to This increases income yet again, causing a second change in consumption equal to The total change in demand resulting from the initial change in government spending is and the spending multiplier for this economy is . The following graph shows the aggregate demand curve (AD₁ ) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the spending multiplier effect takes place. Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1…

Suppose the consumption function is given by C(Y) = 50+0.5 (Y-T), where Y represents income and T represents net taxes. Suppose that the level of government expenditure, G, is 200; net taxes, T, are 200; planned investment, I, is 400. 1)The government expenditure multiplier is:     a. -2   b. -1   c. 2   d. 1   The equilibrium level of output is:   a. 850   b. 1500   c. 900   d. 1100

Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.75Yd and generates $3000 output and income in equilibrium.  Suppose also that the government spends 300 and imposes a lump-sum tax of 50.   What is the level of intended investment? (round your answer to the nearest whole value)

2. Answer the following questions based on the information given below: Autonomous consumption = $10 billion; autonomous investment = $40 billion; autonomous government spending = $35 billion; autonomous exports = $20 billion; autonomous imports = $25 billion and marginal propensity to save = 0.4. mps = 0.4 mpc=0.6 a) Write out the consumption function using the above information. b) Graph the information above on the aggregate income and aggregate expenditure graph. Calculate equilibrium income/output. Please show your work. d) Show the equilibrium income/output on the graph.

Q1