c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. d. What is the new level of income? What must the new money supply be? What is the tax multiplier?
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Only D and C
![2. An economy is initially described by the following equations:
C= 600 + 0.75(Y - T)
I= 1,200 – 50i
M/P = Y – 200i
G= 2000
%3D
T= 2000
M = 4,000
P = 2
a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate
and level of income. Label that point A on your graph.
b. Suppose that a newly elected president cuts taxes by 20 percent. Assuming the money
supply is held constant, what are the new equilibrium interest rate and level of income?
What is the tax multiplier?
1
c. Now assume that the central bank adjusts the money supply to hold the interest rate
constant.
d. What is the new level of income? What must the new money supply be? What is the
tax multiplier?
e. Now assume that the central bank adjusts the money supply to hold the level of income
constant. What is the new equilibrium interest rate? What must the money supply be?
What is the tax multiplier?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc633d0d-eb4e-461e-acfd-f7cb7959d862%2F671f112a-e62f-4dac-be06-075347ba4b75%2Fobzwzwd_processed.jpeg&w=3840&q=75)
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- Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.2. An economy is initially described by the following equations: C= 600 + 0.75(Y - T) I= 1,200 – 50i M/P = Y – 200i G= 2000 %3D T= 2000 M = 4,000 P = 2 a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. b. Suppose that a newly elected president cuts taxes by 20 percent. Assuming the money supply is held constant, what are the new equilibrium interest rate and level of income? What is the tax multiplier? 1 c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. d. What is the new level of income? What must the new money supply be? What is the tax multiplier? e. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier?Macroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.
- 1) Consider the following economy: Č = 3,1 = 1.5, Ğ = 2.65,T = 2, f = 0.5, d = 0.1, a = 0.8 %3D %3D %3D A) Write the mathematical expression of the consumption function B) Write the mathematical expression of the investment function C) Find the IS curve and graph it.1. Suppose that the economy can be described by the following equations: C = 400 + (8/9)*DI I = 300G = 800T = (1/2)*Y (X – M) = 0. a. If national income (Y) increased by $1, by how much would consumption increase? What is the name of this concept?b. Find the equilibrium level of output.c. The budget for this fiscal year increases government spending by $50. i) Sketch the effect of the increase in government spending.ii) Calculate the new equilibrium level of income.iii) Calculate the change in income and compare to the increase in government spending. Comment.iv) Given your numerical answer in part (iii), calculate the change in national income when government spending increases by one dollar.v) Derive the actual value of the fiscal multiplier using an algebraic equation. Compare to part (iv).Now G assumes its original value of G = 800.d. Congress decreases the tax rate from (1/2) to (1/4) i) Sketch the effect of the decrease in the tax rate. ii) Calculate the new equilibrium level of…14. An economy is initially described by the following equations: C=400+ 0.85(Y-T). I = 1000 - 40 r. (M/P)d = Y - 100r. G = 1,000. T = 1,200. M = 10,000. P = 4. a. Derive and graph the IS curve and the LM curve. Calculate the equilibrium interest rate and level of income. Label that point A on your graph. Suppose that a newly elected president cuts taxes by 25 percent. Assuming the money supply is held constant, what are the new equilibrium interest rate and level of income? What is the tax multiplier? Show your work. b. c. Now assume that the central bank adjusts the money supply to hold the interest rate constant. What is the new level of income? What must the new money supply be? What is the tax multiplier? Show your work. d. Now assume that the central bank adjusts the money supply to hold the level of income constant. What is the new equilibrium interest rate? What must the money supply be? What is the tax multiplier? Show your work. e. Show the equilibria you calculated in parts…
- The following equations describe an economy. Y=C+I+G C=120+0.6(Y-T) I=100-10r, G=60 T=40 M/P=Y-20r. M=600 P=20 a. Derive the equations for IS and LM curves. b. Find the equilibrium level of income and the equilibrium interest rate. c. Suppose government expenditure increases by 50%. Find the equilibrium interest rate and income.The following equations describe an economy. Y = C + I + G. C = 120 + 0.5( Y - T ). I = 100 - 10r. G = 50. T = 40. ( M/ P) d = Y - 20r. M = 600. P = 2. What are the equilibrium level of income and the equilibrium interest rate? If the government increases government spending by 45, what will be the new equilibrium level of income and equilibrium interest rate?Suppose that c= a+by, where c= consumption, a = consumption at zero income, b = the slope of the consumption from function, and y = income, a) are c and y positively related or are they negatively related? b) If graphed, would the curve of this equation slope upward or downward? c) What is the value of c if a = 10, b = 50 and y = 200? d) what is the value of y if c = 100, a = 10 and b = 25?
- 3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households is $10 billion, household consumption is $18 billion, and the marginal propensity to consume (MPC) is 0.8. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 0 5 + + + 10 15 20 25 30 35 40 DISPOSABLE INCOME (Billions of dollars) O $25.2 billion $26.8 billion $24.4 billion 45 0.8, Suppose now that country's national income increases to $34 billion. Assuming the amount paid in taxes is fixed at $10 billion and that MPC = what will be the new household consumption? $21.2 billion 50 Consumption Function (?)Consider the hypothetical country of Kejimkujik. Suppose that national income in Kejimkujik is $300 billion, households pay $100 billion in taxes, household consumption is equal to $160 billion, and the marginal propensity to consume (MPC) is 0.6. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Consumption Function050100150200250300350400450500500450400350300250200150100500CONSUMPTION (Billions of dollars)DISPOSABLE INCOME (Billions of dollars) Suppose now that Kejimkujik’s national income increases to $330 billion. Assuming the amount paid in taxes is fixed at $100 billion and that MPC = 0.6, what is the new amount of household consumption? $148 billion $219.4 billion $220.6 billion $178 billionMathematical economics: For an economy the following consumption function is given : C = 60+0.75 Y. %3D (a) If investment in a year is $35 crores, what will be the equilibrium level of income or output ? (b) If full-employment level of income (i.e., level of potential output) is $460 crores, what investment is required to be undertaken to ensure equilibrium at full employment ?
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