Question

In: Economics

Assume an economy where there are no supply constraints and where businesses want to invest 15...

Assume an economy where there are no supply constraints and where businesses want to invest 15 billion; government collects 20 billion in income taxes and also spends 20 billion; next exports are -5 billion; autonomous consumption is 10 billion; and the MPC is 0.8

a) Write out the Aggregate Expenditure function and calculate the equilibrium level of income.

b Now assume that the government increases both taxes and expenditures by 25 percent. What happens to the equilibrium level of income?

8)A math course has 3 tests during the semester and a test. Each test counts for 20 percent of the course grade, and the test counts for 40 percent of the course grade. JJ has scored 50 out of 100 in each of the 3 tests. What grade does JJ need to get in the test (score out of 100) in order to reach the score of 60 for the whole course?

Solutions

Expert Solution

a) AD function=>

  

Applying this formula and putting all the values in, we get EQUILIBRIUM LEVEL OF INCOME = $120 BILLION

b) We use the same formula but the value of tax and government expenditure increase by 25%.

Applying this formula and putting all the values in, we get EQUILIBRIUM LEVEL OF INCOME = $125 BILLION

c) 3 tests have 20% weightage while another test has a weightage of 40%. To get total of 60 marks in the course grade we apply the formula given in the picture above and we get that 75 out of 100 marks must be scored in the test having weightage of 40% of course grade to get a total of 60 marks

Rahul Sunny answered 2 years ago
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