Consider a one period macroeconomic model for the closed economy of the island of Anabel. Describe...

Consider a one period macroeconomic model for the closed economy of the island of Anabel. Describe the three agents in the model, the exogenous variables, and the endogenous variables in the model. Graph and describe the competitive equilibrium of Anabel's economy.

Expert Solution

Rahul Sunny answered 3 months ago

Question 1. One period macroeconomic model We consider an economy closed to a period populated by...

Question 1. One period macroeconomic model We consider an economy closed to a period populated by consumers and produce. The representative consumer chooses the quantity of leisure, let of consumption, as its utility under budget constraint. The representative producer chooses the labor factor that maximizes his profile Preferences satisfy the same properties as in the standard consumer model Similarly, the production function, Y = F(K.N), where k is the capital stock and the quantum labor factor obeys the properties than...

Consider a two-period model of a closed economy with government. Assume that the representative agent is...

Consider a two-period model of a closed economy with government. Assume that the representative agent is endowed with ?1 and ?2 as initial endowments in period 1 and period 2 respectively, and has the utility function ? = ln ?1 + ? ln ?2, where ?1 and ?2 denote consumption and ? is the discount rate. Suppose that the government spends ?1 and ?2 in period 1 and period 2 and finances its expenditure through lump-sum taxes ?1and ?2 in...

Consider a static (one-period), closed economy with one representative consumer, one representative firm, and a government....

Consider a static (one-period), closed economy with one representative consumer, one representative firm, and a government. The level of capital K and government expenditures G in the economy are both fixed exogenously. The government levies a lump sum tax T in order to fund its purchases, and the government budget must balance. Suppose the price of consumption is normalized to one (p = 1). The representative consumer has 24 hours of time available (h = 24), which she can use...

Consider the following information on macroeconomic variables in a closed economy of Winterland (all figures are...

Consider the following information on macroeconomic variables in a closed economy of Winterland (all figures are in billion $): C=160 + 0.6 YD I=150 G=150 T=100 Identify the exogenous and endogenous variables in this model. Obtain the equilibrium level of GDP? Using the equilibrium GDP in b, obtain the equilibrium level of consumption spending. How much is the savinglevel at the equilibrium? Calculate the multiplier? If government purchase of goods and services (G) increase by $50 billion, how much the...

25) Consider the following one-period, closed-economy model. Utility function over consumption (C) and leisure (L) U(C,L)...

25) Consider the following one-period, closed-economy model. Utility function over consumption (C) and leisure (L) U(C,L) = C 1/2 L 1/2 Total hours: H = 40 Labour hours: N S = H – L Government expenditure = 30 Lump-sum tax = T Production function: Y = zN D Total factor productivity: z = 2 The representative consumer maximizes utility, the representative firm maximizes profit, and the government balances budget. Suppose there is an increase in total factor productivity, z, to...

Consider the AS-AD model of a closed economy. a. Write down the expressions for the AS...

Consider the AS-AD model of a closed economy. a. Write down the expressions for the AS and AD curves and interpret the expressions: what is the intuition behind the two curves? What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state? b. Analyse the effects of a supply shock that causes a temporary increase in inflation, using a diagram. Assume that the shock lasts for one period and then assumes the...

Consider a closed economy income-expenditure model of the economy where the country begins in a long-run...

Consider a closed economy income-expenditure model of the economy where the country begins in a long-run equilibrium. • Investment (I) and government spending (G) are ﬁxed: I = 41.5, G = 26. • The income tax rate is t = 6.25%, so tax revenue equals T = tY . • The consumption function is C = 12 + 0.8Yd, where Yd = (1 − t)Y . For the calculations below, write your answers as either a fraction or to two...

IS-LM Model (Closed Economy) The following equations describe a small open economy. [Figures are in millions...

IS-LM Model (Closed Economy) The following equations describe a small open economy. [Figures are in millions of dollars; interest rate (i) is in percent]. Assume that the price level is fixed. Goods Market C = 250 + 0.8YD YD = Y + TR – T T = 100 + 0.25Y I = 300 – 50i G = 350; TR = 150 Money Market L = 0.25Y – 62.5i Ms/P = 250 Goods market equilibrium condition: Y = C +...

Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8....

Consider the long-run model of a closed economy with a marginal propensity to consume of 0.8. Suppose the government cuts taxes by $100 billion while holding government purchases constant. What happens to the following variables? Explain and calculate the amount of change for each variable. a. Public saving (Sg): b. Private saving (Sp): c. National Saving (S): d. Investment (I)

Consider the following IS-LM model in a closed economy: C = 335 + 0.3YD I =...

Consider the following IS-LM model in a closed economy: C = 335 + 0.3YD I = 130 + 0.15Y − 850i G = 350 T = 245 i = 0.04 M/P = 3.6Y − 9,250i a. Suppose Government increased the taxes. Show the impact of this policy on IS-LM graph in Short-Run. Be explicit about the assumptions you make (which variables do not change in IS-LM relation in Short Run, which ones increase/decrease). You do not need to show exact...

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