Question
In: Economics
Assume that GDP (Y) is 10,000. Consumption (C) is given by the equation C = 500...
Assume that GDP (Y) is 10,000. Consumption (C) is given by the equation C = 500 + 0.8(Y – T). Investment (I) is given by the equation I = 2,000 – 50r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 500. a. What are the equilibrium values of C, I, and r? (Show your work) (4.5 marks) b. What are the values of private saving, public saving, and national saving? (Show your work) (1.5 marks) c. If government spending rises to 1,000, what are the new equilibrium values of C, I, and r? (Show your work)
Solutions
Rahul Sunny answered 8 months agoRelated Solutions
A. Assume that GDP (Y) is 6,000B. Consumption (C) is given by the equation C =...
A. Assume that GDP (Y) is 6,000B. Consumption
(C) is given by the equation C = 600B + 0.8(Y – T). Investment (I)
is given by the equation I = 2,000B – 100B(r), where r is the real
rate of interest. Taxes (T) are 500B and government spending (G) is
also 500B. Show/type your work/calculations!
1. In this economy, compute private savings, public savings, and
national savings (6 points)
Private savings =
Public savings =
National savings...
(15pt) Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C =...
(15pt) Assume that GDP (Y) is 5,000. Consumption (C) is given by
the equation C = 1,200 +
0.3(Y – T) – 50r, where r is the real interest rate, in percent.
Investment (I) is given by the
equation I = 1,500 – 50r. Taxes (T) are 1,000, and government
spending (G) is 1,500. Here,
notice that C is negatively related to the real interest
rate.
a)What are the equilibrium values of C, I, and r? (3pt)
b)What are the...
Assume that GDP (Y ) is 5,000 in a closed economy. Consumption (C) is given by...
Assume that GDP (Y ) is 5,000 in a
closed economy. Consumption (C) is given by the equation C =
1,200+0.3(Y −T)−50r, where r is the real interest rate, in percent.
Investment (I) is given by the equation I = 1, 500 − 50r. Taxes (T
) are 1,000, and government spending (G) is 1,500.
(a) What are the equilibrium values of
C, I, and r?
(b) What are the values of private
saving, public saving, and national saving? (...
If the consumption function is given by the equation C = 500 +0.5Y, the production...
If the consumption function is given by the equation C = 500 +
0.5Y, the production function is Y = 50K0.5L0.5, where K = 100 and
L = 100, then C equals:3,000.5,000.2,500.1,000.
1. Assume that the consumption function is given by C = 200 + 0.5(Y – T)...
1. 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.
What is the numerical formula for the
IS curve? What is the slope of the IS curve?
(Hint: The slope of the IS curve is the
coefficient of Y when the IS curve is written
expressing r as a function of...
1. Assume that the consumption function is given by C = 200 + 0.5(Y – T)...
1. 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
numerical formula for the IS curve?
b. What is the slope
of the IS curve? (Hint: The slope of the
IS curve is the coefficient of Y when the
IS curve is written expressing r as a...
Assume that the consumption function is given by C = 200 + 0, 75(Y − T)....
Assume that the consumption function is given by C = 200 + 0,
75(Y − T). Investment is 100; government purchases and taxes are
both 100.
(a) This economy has TODAY a GDP of 1700, is this an equilibrium
level of GDP? (HINT: Find the AS the AD and compare them).
(b) Will the GDP NEXT WEEK increase or decrease? (HINT: looking
to your previous answer see if AS is lower or higher than AD, then
think what will happen...
Assume that when an economy has a GDP of $500, Consumption is $550. The MPC is...
Assume that when an economy has a GDP of $500, Consumption is
$550. The MPC is .75. Investment is 25. Government Spending equals
$50. Begin the problem by completing Income/Consumption
Schedule:
GDP=DI
Consumption
Investment Government
$500
$550
$25
$50
600
700
800
900
1000
1100
Graph the Consumption Function.
Add Investment to the graph.
Add Government Spending to the graph.
What is the multiplier? (Use the formula discussed in your
text.)
What...
Assume that when an economy has a GDP of $500, Consumption is $550. The MPC is...
Assume that when an economy has a GDP of $500, Consumption is
$550. The MPC is .75. Investment is 25. Government Spending equals
$50. Begin the problem by completing Income/Consumption
Schedule:
GDP=DI
Consumption
Investment
Government
$500
$550
$25
$50
600
$550+75= 625
$25
$50
700
$625+75=
700
$25
$50
800
700+75=
775
$25
$50
900
775+75=
850
$25
$50
1000
850+75=
925
$25
$50
1100
925+75=
1000
$25
$50
Graph the Consumption...
In the Keynesian cross model, assume that the consumption function is given by C=120+0.8(Y-T)
solve the following:a. In the Keynesian cross model, assume that the consumption function is given by C=120+0.8(Y-T). Planned investment is 200; government purchases and taxes are both 400. Y, C, I G&T are all in billions. i Graph planned expenditure as a function of income. ii. What is equilibrium income? iii. If government purchases increase to 420, what is the new equilibrium income? What is the multiplier for government purchases? iv. What level of government purchases is needed to achieve an income of 2,400? (Taxes remain...
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