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- 1. Country X has following data: C = 20 + 0.8Y4, I = 30, G = 40, Tx = 20, T, = 15, X = 60, M = 20 + 0.04Y, incoming year growth target is 600, All figures is billion. Please calculate: a. National income equilibrium! b. Consumption and saving equilibrium! c. Government income from tax! d. How much change in government consumption if they want to achieve growth target?4. The country of Merryville has an unemployment rate that is greater than the natural rate of unemployment.The government of Merryville increases spending on goods and services by $200 billion, which is financed by borrowing. If the marginal propensity to consume in Merryville is 0.75:i. Calculate the multiplierii. What is the maximum possible change in real gross domestic product (GDP) that could result from the $200 billion increase in government spending?the following macro mo det consumptron : c • C' +cYq and Ya = do posable income Desine d Investment: = I' +jY Government Expenditure s. G =G'+gy Exports = EX : X' IM =F' Imports Taxes : T:T't tY a) what is the equation for y" for this economy? b) Derive for this each of the following multipliers economy. ) Ke' 5) Kpi 2) k 6) Kx' 3) KG' 7) Kg8 "BB 4) Kpi 2 why Might one that the is argue 1 probably a 2 vavia b le g number ? hegathe
- You are given the following information regarding a hypothetical economy: Consumption function is C= 0.3+0.8(Y-T) Investment I=3.5- 50i G= 3 T= 2.5 The demand for real money is M/P=2+0.2Y-50i. The real stock of money is 3.The graph below illustrates the money demand and investment demand for the economies of Pabst and Kokanee. Interest rate Interest rate 15 13 11 9 5 3 1 15 13 11 9 5 3 1 70 60 80 70 90 80 100 110 120 Quantity of money 90 100 110 120 Quantity of money MD MS MS MD Pabst Interest rate Kokanee Interest rate 12 10 8 6 4 12 11 10 9 8 6 5 4 3 0 0 10 10 20 30 40 50 60 Quantity of investment 20 30 40 Quantity of investment 50 70 4 (60,8) 60nsumer spending increases Households 4: More income Product markets 6: Sales increase 2: Sales increase by $100 billion 1: Government spends $100 billion Government Factor markets Business firms 3: Increased jobs and w Multiplier process In the figure above, a "cycle" is originated by a change in spending in the product market. Assume the MPC is 0.80. a. How much spending would occur in the third cycle? billion b. How many spending cycles would occur before consumer spending increased by $200 billion? 5 cycles (Hint: Focus on consumer spending.)
- 1. Interpret what it means if MPC equals 0.95? 2. If your MPC is 0.9 and your income falls by $200, what will be your change in spending? 3. For each of the following determine whether there is movement along a consumption schedule (function), or a shift of the schedule. If there is a shift then indicate the direction of the shift and interpret that shift. a. Consumer’s expectations became more optimistic. b. An increase in the interest rate. c. There is a current low level of consumer durables on hand. d. Consumer incomes rise.QUESTION 3 Give a hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? a. b. Considering both the simple Keynesian and the aggregate demand-supply frameworks, if households as a group experience a decrease in wealth at a given price level, what happen to Total Expenditure (TE), Aggreggate Demand (AD) and Real GDP. Illustrate and explain the change using a suitable graph.4. Suppose an economy had aggregate demand components with the following relationships: Consumption Spending, C=195+0.80° (DY) Investment Spending, I-25 +0.10°Y Government Spending, G-6+0.15*Y Net Export Spending, X-14-0.05*Y Tax Collections, Tx = -20+0.25*Y a. What is the equilibrium income for this economy (Show your work)? b. At the equilibrium income, what is the size of the government surplus (or deficit)? den Cal Page 3 601 c. If the Government decided to Increase G spending by 15, what would be the new equilibrium income for this economy (Show your work)? d. If instead the Government decided to Reduce Tx (taxes) by 6, what would be the new equilibrium income for this economy (Show your work)? yanoM e. If instead the Government decided to Increase G spending and Increase Tx (taxes) both by 30, what would be the new equilibrium income for this economy (Show your work)?
- 4. Show on a diagram how an individual may seek to smooth their consumption over their lifetime. How will this change if the individual is unable to borrow?K The following equations describe consumption, investment, government spending, taxes, and net exports in the country of Economika. In Economika, equilibrium GDP is equal to $. (Round your asnwer the nearest dollar.) If real GDP in Economika is currently $4,850, which of the following is true? A. There will be an unplanned decrease in inventories, and real GDP will increase next period. OB. There will be an unplanned increase in inventories, and real GDP will increase next period. OC. There will be an unplanned decrease in inventories, and real GDP will decrease next period. O D. There will be an unplanned increase in inventories, and real GDP will decrease next period. OE. There will be no unplanned change in inventories, and real GDP will stay the same next period. C=200+0.80(Y-T) 1=400 G=350 T=350 X = 1002. Describe the circular flow of income and expenditures. Explain.