Suppose the economy is characterized by the following behavioral equation: Y = C + I + G + (X-M) Equilibrium condition C = 2000 -f' 0.75Yd Consumption equation I = 4000 Investment expenditure G = 4100 Government Expenditure X = 2800 Export M = 400 + 0.25Y Import equation T = 100 + 0.3Y Tax equation Yd = disposable Income Required: Derive Balance of Payment (BP) curve and explain why it slopes upwards Compute equilibrium national income and Imports for the economy. Differentiate between the closed-economy model and the open economy model

Suppose the economy is characterized by the following behavioral equation: Y = C + I + G + (X-M) Equilibrium condition C = 2000 -f' 0.75Yd Consumption equation I = 4000 Investment expenditure G = 4100 Government Expenditure X = 2800 Export M = 400 + 0.25Y Import equation T = 100 + 0.3Y Tax equation Yd = disposable Income Required: Derive Balance of Payment (BP) curve and explain why it slopes upwards Compute equilibrium national income and Imports for the economy. Differentiate between the closed-economy model and the open economy model

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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This problem examines the implications of allowing investment to depend on output. Suppose the economy is characterized by the following behavioral equations: C = c, + c,YD Y, = Y-T |= bo + b,Y Government spending and taxes are constant. Note that investment increases with output. co is autonomous consumption, C, is the propensity to consume, and bo is business confidence. Solve for equilibrium output. Y = (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the_ character.)
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Q. 2
Assume that Consumption is C = c(Y-T); Taxes T = tY; Investment / = -bi; and Government expenditure (G) is exogenous. Determine the multiplier for an increase in the tax rate.