ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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onsider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y – T). Planned investment is 300, as are government spending and taxes.
What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the equation Y = C + I + G and then solve for Y.)
What are equilibrium consumption, private saving,
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- Suppose GDP = $10,000, autonomous consumption is $600 and planned investment spending is $350, the marginal propensity to save is 0.75, and there is no Government and no foreign sector. What is the equation of the Planned Aggregate Expenditure (AE) function? AE=0.20Y + 300 AE=0.80Y + 500 AE=0.80Y + 900 AE=0.25Y + 950arrow_forwardUsing the Keynesian-cross diagram, the investment function diagram, and the IS Curve, illustrate what happens when consumer confidence falls (thus reducing autonomous consumptions. (See page 319 of the textbook.)arrow_forwardConsider the following income/expenditure diagram in the simple Keynesian model. If taxes, T, were increased, then Group of answer choices A) The Y = C+S+T line would shift to the right, and equilibrium Y would increase. B) the C+I+G line would shift downward, and equilibrium Y would decrease. C) The Y = C+S+T line would shift to the left, and equilibrium Y would decrease. D) neither of the lines would shift, and equilibrium Y would stay the same. E) the C+I+G line would shift upward, and equilibrium Y would increase.arrow_forward
- 11arrow_forwardSuppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and generates $2200 output and income in equilibrium. Suppose also that the government collects a lump-sum tax of 300. How much will the private sector be saving total in equilibrium? (round your answer to the nearest whole value)arrow_forwardConsider a 4-sector Keynesian model like that discussed in class with the following characteristics: exogenous consumption=2000, exogenous taxation=100, government spending=1000, exports=400, planned investment=400. The marginal propensity to save=20%, the marginal tax rate=20% and the marginal propensity to import=40%. The potential output for this economy is 6000. Note that import demand depends on disposable income. a) At its short run equilibrium, this economy is experiencing __________ (a contractionary/an expansionary) gap of __________ (round to 2 decimal places) b) Following the outbreak of a pandemic in the above economy, exogenous consumption falls to 1000 and the marginal propensity to save increases to 40%. In order for this economy to experience a zero output gap, government spending must ____________ (increase/decrease) by ____________ . Assume all other quantities remain unchangedarrow_forward
- Your average propensity to consume is the percentage of each dollar of income, on the average, that is spent for current needs rather than savings. True Falsearrow_forwardIn the Keynesian cross model, assume that the consumption function is given by C = 20 + 0.8(Y- T). Planned investment is 200; government purchases and taxes are both 400. There is no foreign trade. An economist has claimed that the full employment level of output is 2,400. How much should the government expenditure or taxes rise or fall to achieve full employment?arrow_forwardIf the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume equals: 0.6. 0.4. 0.5. -0.4.arrow_forward
- Suppose output and income is equal to 16100, the marginal propensity to consume is 0.65, and autonomous consumption is 675. Calculate total saving for this economy, assuming no public or foreign sector. (Round your answer to the nearest whole number.)arrow_forwardAssume the following information for an economy: Natural level of output = $190b Autonomous consumption = 50 Total investment = 16 Government expenditure = 19 Autonomous taxation = 20 Marginal propensity to consume = 0.6 Based on this information answer the following questions: b) Calculate the output ratio for the economy.arrow_forwardIf the marginal propensity to save (MPS) is 0.70 and autonomous consumer spending is 100, what is the aggregate consumption function? C= 0.80*Y + 100 C= 0.80*Y + 80 C= 0.20*Y + 80 C= 0.30*Y + 100arrow_forward
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