In a simple model without government spending or taxation, if C = a +bY where C is consumer spending and Y is GDP which of the following statements are correct? Note that some of these questions require you to have read relevant sections of Core Unit 13. [FOUR correct answers] Select one or more: a. The consumption function implies that if GDP is zero, consumption is zero b. b is known as the average propensity to consume c. If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b d. a is known as the marginal propensity to consume e. b is known as the marginal propensity to consume f. a is the level of consumption when Y is zero g. If consumption-smoothing consumers become more optimistic about the future, a will increase. h. If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fall

In a simple model without government spending or taxation, if C = a +bY where C is consumer spending and Y is GDP which of the following statements are correct? Note that some of these questions require you to have read relevant sections of Core Unit 13. [FOUR correct answers] Select one or more: a. The consumption function implies that if GDP is zero, consumption is zero b. b is known as the average propensity to consume c. If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b d. a is known as the marginal propensity to consume e. b is known as the marginal propensity to consume f. a is the level of consumption when Y is zero g. If consumption-smoothing consumers become more optimistic about the future, a will increase. h. If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fall

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

See similar textbooks

Similar questions

In a simple model without government spending or taxation, if C = a +bY where C is consumer spending and Y is GDP which of the following statements are correct? Select one or more: a. a is known as the marginal propensity to consume b. a is the level of consumption when Y is zero c. b is known as the marginal propensity to consume d. b is known as the average propensity to consume e. The consumption function implies that if GDP is zero, consumption is zero f. If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b g. If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fall h. If consumption-smoothing consumers become more optimistic about the future, a will increase.
Fill in the missing values in the following table. Assume that the value of the MPC does not change as real GDP changes and that there are zero taxes. (Enter all values as integers.) Real GDP (Y) Consumption (C) Planned Investment (1) Government Purchases (G) Net Exports (NX) $11,000 - $275 $12,000 - $275 $13,000 - $275 $14,000 - $275 $15,000 - $275 Now use the table to find aggregate expenditure and the unplanned change in inventories. Real GDP (Y) $11,000 $12,000 $5,500 $6,000 $ Consumption (C) $5,500 $6,000 Planned Investment (1) $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 Government Purchases (G) $1,200 1,200 Net Exports (NX) - $275 - $275 $1,200 1,200 1,200 1,200 1,200 Planned Aggregate Expenditure (AE) $ Unplanned Change in Inventories
Use the following information on economy X to answer the questions below.Consumption function: C = 250 + 0.8Y Investment spending: I = 150 Government spending: G = 500 Exports of goods and services: X = 200 Imports of goods and services: Z = 150 Proportional tax rate: t =25%Full employment level of income = 3575 1. Calculate the equilibrium income for the economy. 2. Calculate the change in government spending required to reach (3) full employment level of income.
Use the following information on economy X to answer the questions below. Consumption function: C = 350 + 0.6Y Investment spending: I = 250 Government spending: G = 400 Exports of goods and services: X = 300 Imports of goods and services: Z = 150 Proportional tax rate: t =25%(Note: Show all calculations and round off to 2 decimal places).Q.4.1.1 Q.4.1.2Q.4.1.4 Q.4.1.5Calculate total autonomous spending for economy X. (3) Calculate the multiplier for economy X. (3)Calculate the budget surplus or deficit at the equilibrium level of income. (3) Calculate the change in equilibrium income if the government decides to (3) increase expenditure to R500.Q.4.1.3Calculate the equilibrium income for the economy. (Hint: Use the multiplier method).(3)
For the following problem, assume that the MPC, b, takes into account how much consumers spend as total income (Y) in the economy is changes. (Also: Hint GDP = Total Y) So we can rewrite our consumption function as :C= a +bYAssume:a= $2900 billionb=.75GDP= $9,000 billion.A) What is C=B) What is S=C) If consumers were the only ones buying goods in the economy, would the economy have an excess supply of goods, excess demand of goods or would the economy be at equilibrium ?
This question is based on the following information regarding a goods market model: Autonomous consumption = R450 million Government spending = R300 million Taxes = R200 million Marginal propensity to consume = 34 At an equilibrium income level of R2 400 million, the consumption spending is equal to ... Select one: A. R2 100 million B. R1 650 million C. R2 250 million D. R2 550 million
Complete the following table:a. Show the consumption and saving schedules graphically.b. Find the break-even level of income. Explain how it is possible for households to dissave at very low income levels.c. If the proportion of total income consumed (APC) decreases and the proportion saved (APS) increases as income rises, explain both verbally and graphically how the MPC and MPS can be constant at various levels of income.
Consider the macroeconomic model shown below: C = 500+ 0.80Y | = 1,500 G = 1,000 NX = - 100 Y=C+I+G + NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. (Enter your responses as integers.) Aggregate Expenditures (AE) $ $ GDP $11,600 $17,400 Unplanned Change in Inventories
Problem 1: You are given the following model for the economy of a country: Consumption function: C=2000+0,75-YDI Investment function: I=10500 Government spending: G = 12000 Tax function: T=200+0,4·Y - Disposable income: YD = Y -T+TR Transfer: 1000 a) What is the level of equilibrium output? b) What is the new equilibrium output if investment decreases by 2 000 units? c) How much does the government collect in taxes when the economy is in equilibrium? d) What is level of the government’s budget? e) Calculate the tax multiplier? f) Calculate consumption at the equilibrium output.
Use the information below to answer the following questions. Suppose that in China, investment is ¥190 billion, saving is ¥170 billion, government expenditure on goods and services is ¥195 billion, exports are V230 billion, and imports are *270 billion (Y is yuan, the currency of China). The government received billion in tax revenues. The government has a budget investment by and investment. equal to billion which is exerting a(n) the demand for loanable funds, which influence on the real interest rate
Give typing answer with explanation and conclusion Now let's keep the same model, but instead of having government spending (G) as a given number, I am asking you to calculate the amount of government spending that will make Y = 3000. Remember, the other parameters are as follows: a = 125 MPC = 0.75 I = 275 NE = 100
According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively a. 0.99 and 1.59 b. 1.59 and 0.99 c. 1.3 and 1.7 d. 1.7 and 1.3