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 = I2 + 15

2I + 10

where C and I are both in billions of dollars. Find and interpret both MPC and MPS

when I = 55.

Solutions

Expert Solution

Colby Messinger answered 1 year ago

Next > < Previous

Related Solutions

3. The components of planned aggregate spending in a certain economy are given by Consumption Function:...

3. The components of planned aggregate spending in a certain economy are given by Consumption Function: C = 800 + 0.75(Y - T) – 2000r Planned Investment: I p = 400–3000r Government Revenue and Spending: T = 300 and G = 450 Net Export: NX = 75 where r is the real interest rate (For example, r = 0.01 means that the real interest rate is 1 percent). (1) Find the level of public saving. (2) Suppose that the real...

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 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...

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 an increase in government spending and an increase in private investment. Given the...

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; 4080; 20800; 400800; 200

The consumption preference function in an economy is defined as: U(c, l) = A ln(c) +...

The consumption preference function in an economy is defined as: U(c, l) = A ln(c) + B ln(l) There is a proportional tax on profits earned by consumers, the consumer's budget constraint function is defined as: c = wN + (1 − τ )π The production function of the firm is defined as: Y = zKαN 1−α 1. What is the consumer's optional budget of consumption and leisure as a function of f w, τ , π, A, B and...

Amy’s utility function is U = √ C, where C is consumption and is given by...

Amy’s utility function is U = √ C, where C is consumption and is given by C = Income − Expenses. Amy’s income is $10,000 and there is a 5% chance that she will get sick, which would cost $3,600 in medical expenses. (a) (5 points) What is Amy’s expected utility if she doesn’t have insurance? (b) (5 points) What is the actuarially fair premium for a full-coverage insurance plan? What is the actuarially fair premium for an insurance plan...

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...

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.

(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...

Subjects