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

Expert Solution

Rahul Sunny answered 1 month ago
Next > < Previous

Related 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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT