Question

In: Economics

In a closed economy, given the following: The consumption function C = 0.8(1 – 0.25) Y...

In a closed economy, given the following:

The consumption function C = 0.8(1 – 0.25) Y + 12          

The average tax rate t = 25%

The level of private investment I = 26

The level of government spending G = 14

Where Y is the national income.

  • Calculate the equilibrium level of income and output in the economy.
  • Calculate the expenditure multiplier and show the effect of
  1. an increase in government spending and
  2. an increase in private investment.

Given the short run production function, Q = 3L2 – 0.1L3

( a) Write down the equations for,

(i) the marginal product of labor, MPL

(ii) the average product of labor, APL.

(b) Find the value of Q for which the MPL and APL are maximized.

(c) Show that the MPL= APL when the APL is at a maximum

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Question 1. In a closed economy, the consumption function is given by C = 200 +...
Question 1. In a closed economy, the consumption function is given by C = 200 + 0.75(Y-T). The investment function is I = 200 – 25r. Government purchases and taxes are both 100. The money demand function in the economy is (M/P)d = Y – 100r. The money supply M is 1,000 and the price level P is 2. a. Derive the equations of IS and LM curves. b. Find the equilibrium interest rate r and the equilibrium level of...
Consider the following closed Keynesian economy: Desired consumption and investment are given by: Cd = 200+0.8(Y...
Consider the following closed Keynesian economy: Desired consumption and investment are given by: Cd = 200+0.8(Y −T)−500r Id = 200 − 500r. Taxes and government expenditures are given by The real money demand is T = 20+0.25Y G = G=196. Md P = 0.5Y − 250(r + πe). The money supply M = 9890 and the expected inflation πe = 0.10. (a) Derive the equations for the IS and LM curves and show them on a (Y, r) graph. (b)...
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? (...
In a closed economy, the consumption function is: c = 1.15 + 0.75(y - t) billions...
In a closed economy, the consumption function is: c = 1.15 + 0.75(y - t) billions of 1992 dollars. The tax function is: t = 0.1y + 0.1 billions of 1992 dollars. Planned investment is $1 billion and planned government expenditures are $1.5 billion. Calculate: Explain the adjustment process to the new equilibrium. (3 points) How does the government’s expenditures on $0.25 billion worth of goods and services get financed? (3 points) Show that leakages from the circular flow equal...
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...
(b) Consider an economy where the consumption function is given by ? = 500 + 0.8(?...
(b) Consider an economy where the consumption function is given by ? = 500 + 0.8(? − ?). Investment is given by 2000 − 100? (where ? is the real interest rate), government spending is 5000, taxes are equal to 4000. Exports are 1000, while imports are given by ?? = 0.2?. (i) Suppose that the real interest rate is ? = 5. Calculate the equilibrium level of real GDP for this economy. Now suppose that the Fed decides to...
Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function...
Consider the economy of Hicksonia a) The consumption function is given by: C=300+0.6(Y-T). The investment function is: I=700-80r. Government purchases and taxes are both 500. For this economy, graph the IS curve for r changing from 0 to 8 b) The money demand function in Hicksonia is (M/P)^d=Y-200r. The money supply M is 3000 and the price level P is 3. For this economy, graph the LM curve for r changing from 0 to 8. c) Find the equilibrium interest...
7. Consider the following income-expenditure model of a closed economy. The aggregate consumption function is C...
7. Consider the following income-expenditure model of a closed economy. The aggregate consumption function is C = 100 +0.8(Y – T); taxes are T = 380; investment, I, is 300 and government expenditure, G, is 200. (a) Calculate the multiplier, equilibrium income and the government budget surplus [6 marks] (b) Now let taxes, T = 10 + 0.25Y. Recalculate the multiplier, equilibrium income and the government budget surplus. Try to explain any differences between your answers and your answers to...
7. Consider the following income-expenditure model of a closed economy. The aggregate consumption function is C...
7. Consider the following income-expenditure model of a closed economy. The aggregate consumption function is C = 100 +0.8(Y – T); taxes are T = 380; investment, I, is 300 and government expenditure, G, is 200. ( a)Calculate the multiplier, equilibrium income and the government budget surplus [6 marks] (b)Now let taxes, T = 10 + 0.25Y. Recalculate the multiplier, equilibrium income and the government budget surplus. Try to explain any differences between your answers and your answers to part...
Suppose a closed economy has a consumption-output ratio of 0.8. Total output is 1 Billion in...
Suppose a closed economy has a consumption-output ratio of 0.8. Total output is 1 Billion in 2018 and the capital stock equals 5 Billion. It's depreciation rate and population growth rate are both equal to 2%. What is true in 2019?    income will have grown     consumption will take an even larger share of output     we do not have enough information to calculate changes from 2018 to 2019     the capital stock must be smaller than in 2018
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT