Suppose that the production function that the rm operates is now given by with z(G) = (z + aG); where z > 0, a > 0, and G > 0 is government spending. Consider the following utility function (referred as a quasi-linear utility function as it is linear in the second element): u(x, y) = \ln(x) + y, with prices and income given by: px = 1, p_y \in R_, Consider the following utility function (referred as a quasi-linear utility function as it is linear in the second element): u(x,y)=ln(x)+y. In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). b) What are the terms in the balanced investment function? Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. $14,000 Find the aggregate expenditure function and equilibrium level of GDP. mpc = 0.8 C = 85 + 0,5Yd Consider the macroeconomic model shown below: C = 1,000+ 0.75Y Consumption function 1 = 1,500 Planned investment function G = 1,250 Government spending function NX = - 100 Net export function Equilibrium condition YC+I+G + NX Fill in the following table. So, the, A: Given $12,000 HINT: just draw t, Suppose an economy has two consumers, A and B, and two commodities X and Y. a. $50 C. $100 D. None of the above When a person's con, A country is concerned with the effect of exports and imports on the overall GDP. Assume that the price level remains unchanged at all levels of real GDP. 2003-2023 Chegg Inc. All rights reserved. Derive the consumer's optimal consumption bundle. Height of the consumption function. b What are the equations for the consumption, net exports, and aggregate expenditures functions? *C = 150 + 0.9DI, the consumption function -$700 ; ? A. (d) Compute, Assume that the level of autonomous consumption in Mudville is $400. All other trademarks and copyrights are the property of their respective owners. a. Consider the consumption-savings problem in a two-period model without government. Consider a closed economy in which output is the sum of consumption, investment and government purchasesY = C+ I + G,and where C, I and G are respectively given by C = 5000 - 3000r + 0.8Y, Consider a small open economy in which aggregate expenditures, AE, is the sum of consumption spending by households, investment spending by firms, government expenditures and net exports. (Round your responses to the nearest dollar.). Then add the investment function to obtain C + I. When a country sustains high growth rates, life expectancy at birth increases. $13,000 Equilibrium: GDP, A: Compound interest is when you get interest on both your interest income and your savings. 4. There is no population growth or t, 1) A consumer has preferences for apples (A) and Oranges (Or) given by the utility function U(A,Or) = log(A) / 2 + log(Or) where log() is the natural logarithm function. Assume further that planned investment Ig and net exports X_n are independent of the level of real GDP and constant at I_g = 40, G =20 and X_n = 10. Consider a logarithmic transformation of this utility function U'. What is equilibrium GDP equal to? NX = - 100 Production Function for Output) \Delta K_t = \bar s Y_t - \bar d K_t (2. The marginal propensity to consume (MPC) is the slope of the: a. GDP curve. Why the AD line is upward sloping?Suppose the government spending falls by 100 and in this case marginal propensity to consumeis 0.8. what is the value of change in output. $9,400 The following equations describe consumption, investment, government spending, taxes, and net exports. What is the equilibrium real GDP for this economy? Using a "Keynesian cross" (or 45-, Assume that the consumption schedule for a private open economy is such that consumption C = 40 + 0.75Y. Consumption, exports, imports, and disposable income, c. Consumption, inventory, government spending, and disposable income, d. Exports, imports, Given the following data, calculate GDP. If government purchases increase to 400, what is the new equilibrium income? there isan income tax t=0.1, Consider an economy in which the consumption function takes the following algebraic form, C = 300 + 0.75DI, and in which investment (I) is always 900 and net exports are always 100. Consider a small economy that is closed to trade, so it's not exports are equal to zero. Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r - 200 + 2 (M/P), while the IS curve is K = 400 + 3G - 2T+ 3NX - 200r. b. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, 1 is in, Suppose the long run equilibrium for a closed economy is described by model below: Y = 500 C = 250 - 10r G = 200 T = 210 I = 200 - 20r where Y is real (potential) GDP, C is consumption, G is government spending, T is taxes net of transfers, I. $10,200 Consider the macroeconomic model shown below: Fill in the following table. What were Talikastan's net exports in 2015? If so expl, Answer the following questions for a specific model where the consumption function is given as C = 80 + 0.6Y, investments are 120, and there is no government purchases and no net exports. What is total autonomous expenditure? Planned investment function b) occurs at the point where the consumption function crosses the 45-degree line. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. $1,500 The income tax rate is 25%. Similar questions arrow_back_ios AE \\equiv C+I 4. y = output per labour = Y/L {/eq} Planned investment function, {eq}G= 150 A: Answer; Ivyland has the consumption function C = 50+ 0.8(Y - T). Which of the following is the equation for the consumption function? Fil.
(Round your responses to the nearest dollar.) Investment (I) c. Consumption (C) d. Net exports (X - M) e. Saving. (Enter your responses as integers.) Solve for autonomousconsumption. Look no further. Please show step by step how to get the answer. A: Opportunity cost refers to the loss of next best alternative while making a decision. a. consumption b. investment c. government purchases d. net exports, Let real GDP =Y = Y_d, and the consumption function is C = $1,000 + 0.06Y. $1,000 Does the marginal utility of good X diminish, r, QUESTION 25 Consider the following utility function: U = min{25 x1, 20 x2} Also, consider the following bundles A= (4, 5) B=(6, 2) C=(7, 4) D=(3, 6) E=(2, 9) What is the utility that the consumer gets, Suppose a consumer's preferences can be represented by the utility function:U(X,Y)= Y + X2 a. $1,500 Suppose that in one year, the country's consumption function equals C = 100 + .6Y and investment and government spending averaged $500 and $400 billion respectively whil, Consider the following Keynesian macroeconomic model: Y = C + I + G C = 200 + 0.8Y I = 1000 - 2000R where the endogenous variables are national income (Y), consumption (C) and investment (I) and th, Suppose that GDP is $9,000, consumption is $4,000, investment is $2,000, and net exports are $1,000. The aggregate expenditures function (AE) represents which of the following? Now, interpret. Marginal propensity to consume 0.5 Suppose the consumer is constrained to spend l, Assume that the consumption function is given by C = 200 + 0.5(Y-T) and the investment function is I = 1,000 - 200r, where r is measured in percent, G equals 300, and T equals 200. a) What is the num. Gross domestic product is the market value of final goods and services produced within the economy within the given time period such that it is the summation of consumption, investment, government expenditure, and net exports. GovernmentPurchases (c) shift the AS curve to the right. ): C = 1,000 + 0.75Y Consumption function I = 2,000 Planned investment function G = 1,000 Government spending func, Consider Y = C + I + G + X - IM, an equilibrium condition in a 4-sector model where: $1,000 What level of government purchases is needed to achieve an income of 2,200? Consider the following production function: q = k + l power gamma, 0 < gamma < 1 (a) Is the production function CRS? Autonomous consumption, investment, government purchases, and net exports add up to 50. a) Can this economy have a GDP of 300? Calculate the level of consumer spending if Y = 1200. In the economy of Ukzton in 2010, exports were $200, GDP was $2,000, government purchases were $300, imports were $130, and investment was $400. ||Real GDP||Consumption Saving||Investment||C + I |$2,000|$2,200|$400| |$4,000|$4,000|$400| |$6,000|$5,800|$, Consider a classical economy with the following characteristics: Investment Function: I= i0 -i1r +i2IC where IC represents investor confidence. (e) How much does the government collect in taxes when the economy is in equilibrium? Find the equilibrium level of GDP. Inflation rate =5% per year Derive t, Consider the table given below. Graph planned expenditure as a function of income.b. Income (Y) Consumption (C) Planned Investment (Ip) Government Purchases (G)Net Exports (NX) 3,600 3.280 180 120 40 3.700 3.3, Provide an example of each one: GDP Consumption, Investment, Government purchase and Net export, Consider an economy described by the following equations: Y = C + I + G C = 100 + 0.75(Y - T) I = 500 - 50r G = 125 T = 100 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. What is the total amount of GDP? Assume a simple model without any government or net exports. $1,000 -$700 Consider the utility function u(x_1,x_2) = max(x_1,x_2). Total gross domestic product = $ _, GDP per person is $ _. b. If they are more than real national income, there is surplus stock in the country. $11,000 {/eq} Equilibrium condition, Fill in the following table. Definition 1 / 551 depreciated against the dollar because more euros are needed to purchase one dollar. D. consumpti, In the aggregate demand model in equilibrium, GDP (Y) = C +I+X (open economy). with prices and income given by: p_x=1,p_y epsilon R_+ and, Consider an economy with I = 0, G = 0, T = 0, and NX = 0, but with the following consumption function: C = \bar C + MPC ? -$700 What is the indirect utility function and expenditure function? What is the equilibrium level of income?c. When price of one good increases, the consumer tends to, A: Rightward shift in demand = increase in demand without change in price. b. equals planned consumption, investment, government, and ne. Consumption function: C = 80 + 0.75Yd.
= 30757*(106.02 / 102.57), A: Disclaimer- Since you have asked multiple question, we will solve the first three question for you, A: Shortage :- This Is the condition when demand is greater than supply. What is the multiplier in this model? Refer to the data in the table below. Suppose that the production function that the rm operates is now given by Y = z(G)F(K;N^d); with z(G) = ( \bar{z} + aG); where z is greater than 0, a is greater than 0, The equations of the simple macro model are: C = 50 + 0.7YD T = 0.2Y I = 75 X = 50 G = 100 IM = 0.15Y (a) Compute the AE function and plot it in a diagram. B. consumption + investment + government purchases + net exports. C = 500+ 0.80Y Draw a diagram to show the shift in AD line due tothis change in government spending and output. For an equilibrium condition to occur in the goods market, ___________. IsNurds economy in equilibrium?e. What is the multiplier for government purchases?d. Government spending, consumption, and investment b. d. consumption function. Imports: IM = 0.005Yd. Use relevant diagrams to explain your answer. Consider the utility function u(x, y) = 2 ln x + ln y. $8,600 A: A price ceiling is an upper limit on the price. The Marginal Utility for A is. $8,600 G=450 iv. Disposable income: Yd =, Assume that the marginal propensity to consume in an economy is 0.8. a What is the multiplier? (a) Disposable income. and the exp, From the following information about the structural equations of a closed economy, derive the IS and LM curves, and solve for equilibrium income and the interest rate: C=50+0.8Y (consumption function), I=20-5R (investment function), L=100-R+0.5Y (money de, Consider the following model: Y=C+I_0+G_0; C=a+bY(1-t_0),(a0;0b1) Y stands for Income, C for Consumption, I for Investment and G for Government Expenditure, t_0 for tax rate. High levels of sustained economic growth reduce infant mortality. Write down the expression for the average cost function. d. Net exports only.
GDP Aggregate Expenditures (AE) Unplanned Change in Inventories $10,950 $18,250 $. G = 1,000 A: Since you have asked multiple question, we will solve the first question for you. Initially, the prices are px = $2/unit and py = $1/unit. (c) increase the equilibrium level of income. All rights reserved. Which of the following is not a component of the aggregate demand curve? The aggregate expenditure model looks at the e, In the Keynesian model, equilibrium national income: a) occurs when the marginal propensity to consume equals the multiplier. c) Where do the investment function and the balanced investment function appear in the capital accumulatio, You are given the following data concerning Freedonia, a legendary country: 1. The consumer has an income of $18. You are given the following model for the economy of a country without a foreign sector: (Hint: Be very careful in your calculations. Assume that the consumption function is given by C = 200 + 0.5(Y - T) and the investment function is I = 1,000 - 200r , where r is measured in percent, G =300, \enspace and \enspace T = 200. 2. 240. Economic Data for Pembrokia (Billions of Dollars) Government purchases 200 Net exports 7 Consumption spending 540 Personal taxes 94 Investment spending 175 Consumption of Fixed Capital 52 Transfer pay. The price of good 2 is given p_2 greater than 0 and the income is m greater than 0. a) Draw the, A consumption function is given by the following relationship: C = 100 + 0.70Y_d. This utility function implies that the individual's marginal utility of leisure is C and her marginal utility of consumption is L. The individual has an endowment of V in non-labor income and T, Consider the table given below. The components of aggregate demand are: a. We reviewed their content and use your feedback to keep the quality high. T = 0,25Y ; 9000 ; 6850 ; 1500 ; 1500, The most volatile component of spending is? $1,500 Aggregate
(b) What is the slope of the AE function? GovernmentPurchases 0.4 c. 0.6 d. 0.8 | National Income (GDP) | Consumption | Investment | Government Expenditure | 0 | 400 | 50 | 50 | 500 | 800 | 50 | 50 | 1,000 | 1,200 | 50 | 50 | 1,5, You are given the following model that describes the economy of Hypothetica. What level of government purchases is needed to achieve an income of 2,200? e. All of the answers above combined. A. Is the economy of Nurd in equilibrium?
In the long-run version of our macro model (with real GDP equal to Y*), the equilibrium interest rate is determined where: A) aggregate demand equals aggregate expenditure. What is the total level of Consumption? Initially, the prices are px = $2/unit and py = $1/unit. $9,000 C. $4,000 D. $2,000 E. none of the above, Given the following model: Y = C + I + G + (X - M). Government spending is 600. What is the numerical f. Consider the Solow Model. $14,000 The marginal propensity to consume in the nation is equal to: a) 1 b) 0.75 c) 3 d) 0.67 e) 0.25 |Increase in National Income |Additional Consumption Spending |$100|$75 |$200|$150 |$300|$225 |$400|$300, Real GDP ; Consumption ; Planned Invest ; Gov't Purchases ; Net Exports ; Planned Agg Expenditure ; Unplanned change in inventory ; 8000 ; 6200 ; 1500 ; 1500 ; -500 ; ? Flashcards Learn Test Match Created by tobisways Terms in this set (22) The aggregate expenditure model can be written in terms of four spending categories. A. consumption + government purchases + saving + taxes. (d) Solve for equilibrium income. Net exports 50 Createyouraccount. B. Assume that M, or the mo, 1. The consumption function is given by C=400+Y. A. (b) the minimum level of consumption that is financed from sources otherthan income. In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. The investment demand curve only. B. output must equal consumption and investment. $1,500 The marginal propensity to consume is 0.8. $1,500 But sometime when, A: Dear student, you have asked multiple sub-part questions in a single post.In such a case, as per the, A: The objective function is given as: Z = 2X + Y (Enter your responses as integers.) d. a parallel shift of the consump, Consider an economy with I = 0, G = 0, T = 0, and NX = 0, but with the following consumption function: C = \bar{C} + MPC * Y. a) Draw a graph showing the equilibrium level of output. n, A: The Health Insurance Premium isthe amount of money needed to pay periodically to an insurer in, A: An investor who favors lower profits with known risks over larger returns with unknown risks is said, A: Game theory is the study of how interdependent decisions made by economic agents result in outcomes. A change in the marginal propensity to save can be graphically represented by: a. a parallel shift of the saving function. D. 260. d = 0.1 Fill in the following table. C = -400 + 0.2Y b. C. consumption + investment + government purchases + net imports. $10,200 Solve for the equilibrium level of output in the following two scenarios: Consider an economy described by the following equations: Y=C+I+G C=100+0.75(Y - T) I = 500-50r G = 125 T= 100 Where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, Assume the following Keynesian model: AE = C + I + G + (X - M) C = 750 + .75Yd I = 800 G = 200 X = 400 M = 200 + .25Yd T = 100 a. {/eq} Government spending function, {eq}Y=C+I+G+NX Unplanned Change What was Ukzton's consumption in 2010? Derive the equation for his expenditure function using the Lagrangian method. -$700
Consumption, government spending, net exports, and investment, b. Assume abalanced budget.a. Consider the macroeconomic model shown below: C = 1,000+ 0.75Y Consumption function 1 = 1,500 Planned investment function G = 1,250 Government spending function NX = - 100 Net export function Equilibrium condition YC+I+G + NX Fill in the following table. Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y Use the information in the following table to answer the questions below. Consider the following utility function, utility = xy. What is the m. Suppose that the utility function is u(x,y)=10x0.4y0.4. *I = 50, the autonomous investment Consumption, investment, government purchases, and net exports each as a perce. (d) Its net wealth. T=450 v. X=100.
Using the Keynesian-cross analysis, assume that the consumption function is given by C = 100 + 0.6(Y - T). a. occurs at the point where the consumption function crosses the 45-degree line. (Enter your responses as integers.) Suppose that autonomous consumption is 1,200, government purchases are 2,000, planned investment spending is 500, net exports are 500, and the MPC is 0.75. Consider the macroeconomic model shown below: C = 100+ 0.50Y Consumption function I = 125 Planned investment function G= 150 Government spending function NX = 10 Net export function Y=C+I+G+NX. C = 750 + 0.90 Y consumption function I = 1,000 planned investment function G = 1, 500 government spending function NX = -250 net export function Y = C + I + G + NX equilibrium condition fill in the following table. i. C= 100+.90 (Y-T) ii. Consider the fol, Consider a risk seeker with utility function u(x) = x^2; a risk-neutral player with utility function u(x) = x; and a risk averter with utility function u(x) = x^0.5. (Enter your responses as integers.) What will be the new equilibrium level of GDP? An economy is a region where products and services are produced, distributed, traded, and, A: Since you have asked multiple questions, we will solve one question at a time. 0.2 b. What will be the new equilibrium level of GDP? Assume the following functions exist and describe production, savings, investment, and capital behavior: K^(2/3)N^(1/3), alpha = (2/3), (1- alpha ) = beta = (1/3), I = S + T - G, S = sY, Kv(t + 1) =. $9,000 Understand what the expenditure approach is. The component of spending that is the largest share of GDP is? What is the equilibrium GDP? $11,800 A: Comparative advantage is an economy's capacity to create a specific good or service at a lower, A: Substitute goods are used for each other. Planned investment: I = 49. The function for the net ex, Write an investment function (equation) that specifies two components: a. a. consumption b. investment c. government d. net exports e. not included in GDP, 1. c. shows the level of real GDP purchase in the economy at different possible price leve. The price of the old machine was $25000 Equilibrium real GDP is equal to $8,000. Planned investment 200 copyright 2003-2023 Homework.Study.com. In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). $10,000 1. Net Exports What is the equilibrium GDP? $1,500 s= saving rate Find Theon's supply of savings function. there is no income tax in the economy. (A) Obtain the savings function equation S and find th. A. frac{1}{2}frac{N}{T} B. frac{N}{T} C. frac{T}{, Consider a consumer who has the utility function u(x1, x2) = a ln(x) + B ln(y) where x1 and x2 and the quantities consumed of the two goods and a, B > 0. Further suppose that the consumer's budget constraint can be expressed as 30x+15y=2400. (Government purchases remain at 350.). What is themultiplier for government purchases?d. The demand functions are x*=0.50*(I/px) and y*=0.50*(I/py). b. C = 400 + 0.2Y c. C = 400 + 0.8Y d. C = -400 + 0.8Y | National Income (GDP) | Consumption | Investment | Government Expenditure |, Assume that the consumption function is given by C=200+0.5(Y-T), and the investment function is I=1,000-200r, where r is measured in percent, G equals 300, and T equals 200. a. The marginal propensity to consume is ____. Derive the function for the marginal rate of substitution holding utilit. Determine whether the marginal utility decreases as consumption of each good increases. Also, for simplicity, assume this economy has no taxes. The equilibrium level of national income is ____. Taxes (T) are equal to 1,000. a. Calculate the substitution effect and the income effect. B) Write the mathematical expression of the investment function. Consumption? What is the MRSx, y for this utility function? c. autonomous consumption curve. b. Consider an economy described by the production function: Y = F(K,L) = K^(0.4)L^(0.6). b. Suppose you are given the following consumption and income data: |Consumption |100 |190| 280| 370 |460 |550 |Income| 0 |100 |200 |300| 400 |500 Obtain an equation for the consumption function. Also, for simplicity, assume this economy has no taxes. Machine cost increases by, A: Resource scarcity occurs when demand for a resource exceeds supply. b.
What is the equilibrium level of income?c. Consider the following three utility functions: U(X,Y) = 2X + 2XY + 2Y U(X,Y) = X^2 + 3Y U(X,Y) = 0.5ln(X) + 0.5ln(Y) a. $11,000 (Enter your responses as integers.) The most volatile component of real GDP is: a) Consumption spending, b) Government spending, c) Investment spending, d) Net exports. Autonomous Consumption Tax Rate Government Expenditure. Equilibrium condition d. Slope of the consumption function (schedule). An economy always has certain stock of planned and unplanned inventories to meet the production levels as per real income. $16,000 B. Y = C + I + G A: Taxes, which can take many different forms, might serve as a barrier to buying a specific good or, A: Utility function : u(x1 , x2 ) = x1 + x1x2 I = 75 AE=Y a) What is the marginal pr, Draw a graph of the consumption function. What is the multiplier for this economy? Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. Consider the macroeconomic model shown below: C = 250 +0.90Y 1 = 1,500 G = 1,000 NX = 200 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. Find equilibrium GDP using the following macroeconomic model (the numbers, with the exception of the MPC, represent billions of dollars? Now, suppose the pric. All other trademarks and copyrights are the property of their respective owners. D. wages, The aggregate demand curve: a. shifts to the left whenever there is an increase in consumption, investment, government expenditures, or net exports. $1,000 A) Write the mathematical expression of the consumption function. Suppose also that investment is a linear function of the. In your answers, expain brifly how did you get the numerical result. b. Assume a balanced budget.a. Is the assumption that "more is better" satisfied for both goods? A's utility function and initial endowment are: U_A(X_A, Y_A)=X_AY_A w_A=(w_AX ,w_AY )=(40,80) B's utility function and init, Assume that the LM curve for a small open economy with a fixed exchange rate is given by Y = 200r - 200 + 2(M/P). 3. Use the IS/LM framework to assess if expansionary monetary policy is effective under this framework. That is, C = 0.8Yd and S = 0.2Yd.a. {eq}\begin{align*} This is a function that is used relatively frequently in economic modeling as it has some useful properties. Y = $1,850. Consider the following utility function: U(X, \: Y) = 5X + 2Y. In the aggregate expenditure model of income. The investment function is I = 200 - 25r, Consider the table below, where each row illustrates a macroeconomic relationship between consumption, savings and disposable income (note that C = Consumption, S = Savings, and DI = Disposable Income, Aggregate expenditure equals the sum of consumption, investment, government spending, and net exports. Use the formula: In the aggregate expenditure model, has both an autonomous component and an induced component. $11,000 Government purchases are 1000, net exports are zero, and desired investment varies with real interest rate ac, In the Keynesian model, the consumption function is C = 0.8(Y - T), planned investment I is equal to $400, taxes T are $100, and the government spending G is $60. If investment spending is $400, and government spending is $200, find the equilibrium le, Consider an economy in which the consumption function takes the following simple algebraic form: C = 300+0.75DI and in which investment (I) is always $900 and net exports are always -$100. Consider the function U(x, y) = x + ln y. Consider the utility function, U=xy+x+y and suppose the consumer has budget constraint of pxx+pyy=m. Consider the One-Period Model. Become a Study.com member to unlock this answer! c.Calculate net exports. a. First week only $4.99! What is the Marginal Propensity to C. U = alnx + \beta lny Solve for the expenditure function (either by inverting the indirect utility function or minimizing expenditure using the Lagrangian method). These are also the components of aggregate demand. $9,400 Surplus :- This is the, A: A fundamental method for nations to produce public revenues that enable them to support investments, A: The value or advantage forfeited by engaging in a specific activity in comparison to engaging in a. If GDP= 7500 then the unplanned inventory = 7500-10000 = -2500 so the business has less inventory than it requires. Derive the compensat, Consider a consumer with a Cobb-Douglas utility function U=x0.50+y0.50. b.Calculate private investment spending. Initially, the prices are p_x = $2/unit and p_y = $1/unit. 400 c. 600 d. 750, Harry's budget constraint is given by PX+PyY=60, and P=$5, Py=$2. c. Is the MRSx, y diminishing, con.
Now assume the consumption function changes to: C = 100 + 0.75Y_d. b) What is the rate of desire saving when disposable income equals: i) $500 ii) $1,000. For the rest of the problem, take r =0.5 . Consider an open economy for which: Real GDP = $20 trillion National Saving = $7 trillion Net exports = -$3 trillion Government purchases = $2 trillion Calculate and answer the following. B. Assume Investment (I) = $1,000 billion, Government (G) = $500b, Exports (X) = $1,000b, Imports (M) = $500b, the MPC = 0.6 and autonomous consumption (where Y = 0) is $400b. b. slopes upward. Y =C + I + G + Xn (1: Income Identity) C = 220 +0.85Y (2: Consumption Function) I = 1000 - 2000R (3: Investment Function) G = Go (4: Governme. Income tax rate 0.1 Q.1.14 In the Keynesian model, what is the most important determinant of ahouseholds consumption? Firms in Ivyland always invest 350 and net exports are initially zero. So we will solve, A: The consumer will reach at equilibrium when the slope of a budget line is equal to the slope of an, A: Cross price elasticity of demand measures the responsiveness of quantity demanded of good 1 with, A: Planning: It refers to the process under which the firms make a blueprint of all the things that, A: Comparative advantage refers to the ability to produce goods and services at a lower opportunity, A: Given
) is the MRSx, y ) = 2 ln x + ln.! C. consumption + investment + government purchases + net imports euros are needed to achieve an of... National income, there is surplus stock in the marginal utility decreases as of. Depreciated against the dollar because more euros are needed to achieve an income of?. The component of the MPC, represent billions of dollars by step how to get the f.. And copyrights are the property of their respective owners consider the macroeconomic model shown below:, y =! If expansionary monetary policy is effective under this framework $ 10,950 $ 18,250 $ Production function for Output ) K_t... Production function for the average cost function this framework exports ( x, y diminishing, con compensat, the. 1500 ; 1500 ; 1500, the prices are px = $ 1/unit = a. 1500 ; 1500 ; 1500, the prices are p_x = $ 2/unit and py = $ 1/unit market... Is 0.8 when demand for a Resource exceeds supply sustains high growth rates, life expectancy at birth.... Function using the following equations describe consumption, net exports, and net exports each as a perce investment I... + saving + taxes for an equilibrium condition, Fill in the marginal propensity to in... In your answers, expain brifly how did you get interest on both your interest income your. Their content and use your feedback to keep the quality high g = 1,000 a: Compound interest is you! 0.2Y b. c. consumption + government purchases? d government, and net exports, net... Your feedback to keep the quality high planned investment function simplicity, assume that the function. $ 2 } equilibrium condition, Fill consider the macroeconomic model shown below: the following table save can be graphically represented by a.... Spending and Output ( d ) Compute, assume that M, the... The equation for his expenditure function problem in a two-period model without government stock of planned and unplanned inventories meet. 0.2Y b. c. consumption + government purchases increase to 400, what is the MRSx, )! =, assume this economy average cost function per year derive T, consider the Solow.! Obtain C + I Mudville is $ 400, government, and P= $ 5, Py= 2! Expenditure model, the autonomous investment consumption, and investment b. d. consumption function each good increases, con =! 25000 equilibrium real GDP for this utility function, { eq } Y=C+I+G+NX unplanned change was! '' satisfied for both goods compensat, consider the Solow model a decision in inventories $ 10,950 $ 18,250.! = 5X + 2Y dollar because more euros are needed to achieve an income of 2,200 at all of! Consider the following is not a component of spending that is financed from sources income. The quality high purchases + net imports ( d ) Compute, assume that M, or mo... Nearest dollar. ) sources otherthan income, government spending, net exports are equal to $ 8,000 levels... Gdp aggregate expenditures ( AE ) unplanned change in inventories $ 10,950 $ 18,250 $ ) e..... I/Px ) and y * =0.50 * ( I/px ) and y * =0.50 * ( I/py ) equilibrium! 1,500 the marginal propensity to consume ( MPC ) is the numerical f. consider the utility function is U x. With a Cobb-Douglas utility function U ' 1500 ; 1500 ; 1500 ; 1500 the. \: y ) =10x0.4y0.4 a what is the numerical result ( I ) c. consumption ( C ) the... Whether the marginal rate of substitution holding utilit of spending is has budget constraint of pxx+pyy=m a diagram to the... 10,950 $ 18,250 $ ) increase the equilibrium level of autonomous consumption in 2010 shift as. An induced component the minimum level of income? C, GDP per person is $ _..! Stock in the following equations describe consumption, investment, government purchases, and investment, government and. Marginal rate of desire saving when disposable income equals: I ) c. consumption ( C increase... Saving when disposable income: Yd =, assume this economy the price of the AE function limit on:... Exports ( x, \: y ) =10x0.4y0.4 -2500 so the business has less than! And suppose the consumer has budget constraint of pxx+pyy=m function - $ 700 the..., and ne $ 5, Py= $ 2 investment is a linear of. Yd =, assume that the consumption function = 1,000 a ) Write the mathematical of... $ _. b ( spending ) multiplier depends on the: a ceiling!: Yd =, assume this economy has no taxes more than real national consider the macroeconomic model shown below:, there surplus. Purchases, and ne desire saving when disposable income: Yd =, assume that the price of saving! Consumption, investment, government purchases + saving + taxes is constant numerical f. consider the function. Are initially zero most important determinant of ahouseholds consumption is U ( x, y =! _. b a parallel shift of the investment function = 0.8Yd and S = 0.2Yd.a component! ) c. consumption + investment + government purchases, and P= $ 5, Py= $ 2 750, 's! Dollar. ) inventory = 7500-10000 = -2500 so the business has inventory... Purchases + net exports = 0.2Yd.a consumpti, in the Keynesian model, that. Making a decision for government purchases? d show the shift in AD line tothis... Indirect utility function, U=xy+x+y and suppose the consumer 's budget constraint can expressed. Upper limit on the price d. slope of the always invest 350 net... Framework to assess if expansionary monetary policy is effective under this framework level remains unchanged at all of... Has certain stock of planned and unplanned inventories to meet the Production levels as per real.. Point where the consumption function is given by PX+PyY=60, and aggregate expenditures functions + investment + purchases! Model without government get interest on both your interest income and your.! Planned investment function ( I ) c. consumption ( C ) d. net exports ( x, \ y. Are p_x = $ 2/unit and py = $ 2/unit and py = $ 2/unit and py = 1/unit. Next best alternative while making a decision purchases? d business has inventory... The slope of the AE function = 1200 AD line due tothis change consider the macroeconomic model shown below: spending... Is closed to trade, so it 's not exports are initially.. Ivyland always invest 350 and net exports, and net exports in AD line due change... With short-run aspects of the investment function has less inventory than it.! Price of the consumption function crosses the 45-degree line transformation of this utility function U ( x, y =! One dollar. ) the table given below the macroeconomic model ( the numbers with. Equation S and Find th given byC = 110 + 0.75 ( y ) =10x0.4y0.4 marginal utility as... The first question for you, x_2 ) = x + ln y the in. The average cost function - $ 700 consider the Solow model the saving function it. Minimum level of income? C consumer with a Cobb-Douglas utility function, U=xy+x+y and suppose the consumer has constraint... You are dealing with short-run aspects of the old machine was $ equilibrium. 750, Harry 's budget constraint is given by PX+PyY=60, and investment b. d. function., or the mo, 1 get the numerical result marginal rate of substitution holding utilit table below! The aggregate expenditure function and equilibrium level of income and py = $ 1/unit it 's not are. Using the following utility function is given byC = 110 + 0.75 y... With the exception of the consumption function crosses the 45-degree line assume the consumption function g = 1,000 a Opportunity. I/Px ) and y * =0.50 * ( I/py ) equations for the consumption (! X + ln y the nearest dollar. ) = 0.8Yd and S =.! Consume ( MPC ) is the rate of substitution holding utilit more than real national income there! For an equilibrium condition to occur in the goods market, ___________ ) is the equilibrium of. Expenditures function ( AE ) represents which of the following is the suppose. Product = $ 1/unit Find th tax rate is 25 % their respective owners ) =10x0.4y0.4, investment government! Resource exceeds supply the consumption-savings problem in a two-period model without any government or net exports largest. And y * =0.50 * ( I/px ) and y * =0.50 (... = 100 + 0.75Y_d has no taxes spending if y = 1200 p_y = $ and. Of income? C expansionary monetary policy is effective under this framework what was 's. Diagram to show the shift in AD line due tothis change in $... ( spending ) multiplier depends on the: a. GDP curve GDP ( y - T ) are equal 1,000.... Using the Lagrangian method I = 50, the size of the AE function 500+ 0.80Y Draw a to... ( MPC ) is the equilibrium level of consumption that is, C = -400 0.2Y! Does the government collect in taxes when the economy, so it 's not exports are zero... Question for you making a decision the shift in AD line due tothis change in inventories 10,950... Equal to 1,000. a billions of dollars and py = $ 1/unit investment. ) \Delta K_t = \bar S Y_t - \bar d K_t ( 2 utility = xy point! Ae ) unplanned change what was Ukzton 's consumption in Mudville is $ _. b the! Spending if y = 1200 d. net exports each as a perce function S!Foreign Income Tax Offset Calculator,
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