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The following parameters describe the structure of a hypothetical economy:
Autonomous consumption=240
Autonomous investment=1000
Autonomous taxes=100
Autonomous government expenditure=400
Real money supply (M/P)=600
Tax rate=0.25
Marginal propensity to consume=0.8
Interest elasticity of investment=50
Interest
Income elasticity of demand for money=0.25
a) Determine and explain the relative effectiveness of fiscal and
State the values of the fiscal and monetary policy multipliers if the economy is in a
liquidity trap. Explain.
b) Use your answer in part a) above to determine equilibrium income and interest rate.
c)
If government expenditure is increased by 150 units, show how equilibrium interest
rate and equilibrium income will change. Can you determine the extent to which
investment is crowded out as a result? Explain.
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- Chapter 3: Supply and Demanc × C Checkout | Chegg.com Quiz List - Principles of Macro X ms/quizzing/user/attempt/quiz_start_frame_auto.d21?ou=8698368&isprv=&drc=0&qi=9643220&cfql=0&dnb=0&fromQB=0 E 2 - Demand and Supply Ebraam Awad: Attempt 1 Consider the demand for an inferior good illustrated in the graph below. Suppose income increases. What effect would this have in the graph? p. Price po Do Qo Quantity This would result in the demand curve shifting to the right. This would result in a slide down the demand curve. This would result in a slide up the demand curve. This would result in the demand curve shifting to the left. MacBook Pro Search or type URLThe last personal savings rate recorded by the Federal Reserve database was 2.4%. Assume your average tax rate is 35%. The Federal Government recently spent $1.2T on “infrastructure”. Assuming this stands, answer the following question. 1. How much disposable income would the third iteration of this spending generate? 1.1A. What is the estimated increase in aggregate demand as a result of this bill assuming no tax increase?tudentFunctions/Interface/acellus_engine.html?ClassID=186172877 VI The Spending Multiplier is found by the following formula [M = 1/(1-MPC)]. What is the Multiplier if the MPC is .75? A. 4 B. 8 C. 2 OChrome OS: Sign-in again Your Google Ace - 2022 International Academy of Science. All Rights Reserved.
- The following equations describe a certain economy C=200+0.75Yd consumption function I = 100-50r Investment function T = 60+0.2Y Tax function G = 200 Government expenditure X = 100 Exports M = 100 + 0.02Y Import function MS = 2000 Money supply MD = 0.3Y-10r Money demand Required: Derive the IS and LM equations. Caleulate the equilibrium Y, C, T, M and I. General equilibrium occurs when IS and LM curves intersect. Explain the conditions to be satisfied at this intersection, and explain the causes of d'sequilibrium.Consider a closed economy where the goods and money markets are described by the following relationships: C 500+ 0.8 (Y-T) I= 500 10r M P a) 0.1Y35r G = 800 T = 200 M = 1000 P = 2 Where C is planned consumption, I is planned investment spending, T is government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). mpute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output. e) Suppose that, instead of relying on monetary policy, the government intends to take an active role in restoring the economy to the original equilibrium by pursuing an expansionary fiscal policy. How much should government spending change by? With the help of graphs, explain very carefully, the impact of this policy on the economy. f) An…Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to known as the by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase in government purchases on the interest rate and the level of investment spending. Hint: Be sure your final aggregate demand curve (AD3) is parallel to AD₁ and AD₂. You can see the slopes of AD₁ and AD₂ by selecting them on the graph.
- Consider a frugal closed economy without money market. Assume there is no government or exports/imports. The economy is described by the following set of equations. C =1000+0.5⋅Y ID = 600 1. What is the marginal propensity to save of this economy? a) 0.4 b) 0.5 c) 0.1 d) 0.3 e) 0.2 Currently, the economy is saving a half of the amount it consumes. The level of unplanned inventory change is [0, 600, 200, 1400 , 2000 ] and the economy is [equilllibrium or not at equillibrium,]The slope of the aggregate demand curve is determined by the transfer payment multiplier and income tax multiplier. Select one: O True O FalseAre the inventories typically the least liquid of a firm 's current assets? How?
- Suppose that economy of Portugal is characterized by the following C = 200 + 0.5 (Y - T) Represents the consumption function I = 600 – 30 r represents the investment function G = 300 represents the public spendingT = 300 represents the level of taxation (m/p)d = y - 40 r represents the money demand function (m/p)s = 1500 r represents the real money supply d Y represents the global output Find the IS curve the LM curve and deduce the equilibrium level of interest rate equilibrium level of income. The government increases the money supply by 100. How does it affect the equilibrium level of income? Justify your answer. Calculate the new equilibrium... Equilibrium level of incomeHello Can you tell me what the implication of the "Euler equation of consumption " do and what the meaning is behind it R = Expected return delta = Stochastic discount factor C = consumptionWhich of the following will block an increase in the money supply from increasing real GDP (presumably to fight a recession)? Group of answer choices A) A situation in which business investment is negatively related to the interest rates. B) A situation in which the money demand curve is negatively sloping. C) A situation in which an increase in money supply causes a decrease in interest rates. D) A situation in which Aggregate Demand is negatively sloping. E) A situation in which business investment is completely insensitive to interest rate changes.
