Question
In: Economics
Suppose that the consumption function is given by C = 600 + 0.8Y.
Suppose that the consumption function is given by C = 600 + 0.8Y. This implies that if people’s disposable income increases by $100, the consumption will rise by $________, and the saving will rise by $________.
80; 40 | ||
80; 20 | ||
800; 400 | ||
800; 200 |
Solutions
Expert Solution
Here, the MPC is 0.8, that means if the income increase by 100 then consumption will increase by 80 and savings will increase by 20. the answer is "B".
Rahul Sunny answered 2 years agoRelated Solutions
Consider an economy with the following characteristics: · Consumption function is C = 200 + 0.8Y;...
Consider an economy with the following characteristics:
· Consumption function is C = 200 + 0.8Y;
· Planned investment: I = 50;
· Government expenditure: G = 50;
· Exports of the country: X = 20
· The import function: M = 10 + 0.1Y.
· Assume there are no transfer payments and no autonomous
taxes.
All variables are in billions of dollars. C is consumption
expenditure; Y is real GDP; G is government purchases of goods and
services; I...
Given the following information about a closed economy. Consumption C=100+0.8Y Investment I = 1200-30r where r...
Given the following information about a closed
economy.
Consumption C=100+0.8Y
Investment I = 1200-30r
where r is the interest rate Y is Income.
The precautionary and speculative demand for money is as
follows.
MD1=0.25Y
MD2 = 1375-25r
Money supply Ms =2500
a) find the equilibrium values of Y and r.
b) Assume that a budget is now introduced in to the economy and
that consumption is given by
C= 100+0.75Yd
Yd=Y-T
T=20+0.2Y
if government expenditure G = 935
i) find...
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The consumption function for a certain economy is given by C = I2 + 15 2I...
The consumption function for a certain economy is given by C =
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2I + 10
where C and I are both in billions of dollars. Find and
interpret both MPC and MPS
when I = 55.
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...
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...
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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...
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