ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
- Behavioural and Structural equations of an economy are given below:
C = 200 + b (Y – 100 – tY)
I = 100
G = 100
X = 20
M = 10 + 0.1Y
The marginal propensity to consume ‘b’ is equal to 0.8 and proportional income tax rate, t = 0.25.
- Find the equilibrium
national income ; - Find the value of foreign trade multiplier & equilibrium value of imports
If equilibrium national income falls short of full employment income by Rs100, how much government should increase its expenditure to attain full – employment?
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- a) Calculate the national income equilibrium. b) Based on your answer in (a), show the aggregate expenditure graph. c) Explain what would happen to the national income equilibrium if the investment changes by RM100 million.arrow_forwardAssuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which FIVE of the following statements are correct? Select one or more: A. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = m(c0 + I), where m = 1/(1 - c1) is the multiplier. B. if c1 = 0.8 the multiplier is equal to 1/0.8= 1.25 C. if c1 = 0.75 the multiplier is equal to 4 D. assume c0 =100, I=50, c1=0.6. The equilibrium value of Y in a demand-driven economy is 300. E. Assume that Y is initially 400, I is initially 100, and the multiplier is 2.5. I increases by 10%. The multiplier implies that in equilibrium Y will increase by 25%. F. The higher is c1 the larger is the multiplier G. If consumers…arrow_forwardFor a income determination model Y = C +I + G, C = Co + bY d, I = Io + aYd, Yd = Y – T, T = To +tY, G = Go, 0 < a, b, t < 1, find the equilibrium level of income. Find the multipliers for each input.arrow_forward
- Which of the following events will lead to a rise in the level of national income in an economy? A) Firms are encouraged by lower interest rates to build new factories. B) Other countries begin to recover from recession. C) Both taxation and government expenditure are reduced by the same amount. D) A and Barrow_forwardConsider a national income model as: Y= C + I0 + G Y= National Income C= (Planned) Consumption Expenditure I0= Investment G= Government Expenditure Consider Y= 20trillion, G= 4.2trillion, I0= 3.8 trillion. Explain the key elements missing from the National Income model. Add a new endogenous variable to represent that missing element or endogenize one of the exogenous variables to address this issue. C= a+ b(Y-T0) (a>0, 0<b<1) G= gY (0<g<1)arrow_forwardShow full answers to the questions and steps to this exercisearrow_forward
- The marginal propensity to consume is defined as: Question 64 options: the ratio of change in consumption on both domestic and foreign items to the change in income average consumption as a proportion of income the ratio of the change in consumption on domestic items to the change in income the change in consumption on domestic items multiplied by the change in income the change in consumption on domestic and foreign items multiplied by the change in incomearrow_forwardQuestion National Income (Y) = $300; Tax Rate = 0.2 Consumption (C) = $20 +0.9(Y-T) Imports (M) = $100 What must the value of I + G + X be for this economy to be in equilibrium. Sorry, that's incorrect. Try again?arrow_forwardAssuming society’s mpc is constant so an aggregate of income of $3000 aggregate consumption would bearrow_forward
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