2) Given the following National Income Model:

Y = C + I0 + G0 + (X0 - M0)

C = 100 + 0.5(Y - T)

T = 10 + 0.2Y

a. How many endogenous variables are there?

b. Find Y*, T*, and C* if:

I0 = 17

G0 = 13

X0 = 100

M0 = 150

c. What are the economic meanings of (Y - T) and the coefficient 0.5 in the previous Keynesian consumption equation?

d. What is the value of the government spending multiplier?

e. If the government spending increases by 2 billion dollars, what is the amount of change in the national income?

Use the following information of Alfred Industries.

Compute the overhead spending variance and the volume variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

Overhard spending variance:

Overhard volume variance:

Let’s assume a simple Keynesian depression economy with a multiplier of 4 and an initial equilibrium income of $3,000. Saving and investment equal $400, and assume “full employment” income is $4,000. (a) What is the value of the MPC? (b) The value of the MPS? (c) Assume the government plans to cover its spending by increasing taxes enough to run a balanced budget. How much will government spending and taxes have to rise to move the economy to full employment? (d) From the initial equilibrium, $3,000, if investment grows by $100 what will be the new equilibrium level of income and savings?

This week you have learned about the market for loanable funds. In Canada, how has the Coronavirus pandemic affected the market for loanable funds?

• Explain why you think that the pandemic changes one variable in the model.
• Describe the impact on the market equilibrium, including the impact on all other relevant variables.
• Address only *one* shift in the market.
• Think about the variables that will cause a shift (either in demand or supply):
  • Government spending (G)
  • Taxes and/or transfers (T/Tr)
  • Consumption/private saving (C/Sp)
  • Firms’ investment spending (I)

Let the following equations characterize an economy:

C = 400 + 0.8*(Y-T)

G = 300

T = 250

I = 200

a. Draw a graph of planned expenditures for this economy and calculate the equilibrium level of output.                                                

b. Suppose output this year was 3000. Is the economy in equilibrum?

c. If the government wanted to use fiscal policy to move the economy to equilibrium, by how much would it have to increase government spending? What is the government spending multiplier?

d. If the government decided not to change fiscal policy, describe the process by which the economy would move toward equilibrium.

q7. If Congress wanted to implement a tax cut during a recession but had to keep a balanced budget, what would they need to do?

• The government would have to cut taxes in another area.
• The government would have to increase spending.
• The government would have to reduce spending.

q8. Assume the government has a budget deficit and that the economy is experiencing a period of growth higher than predicted. Tax revenues collected by the government are likely to ________, which would ________

• decrease; increase the budget deficit
• increase; increase the budget deficit
• increase; reduce the budget deficit

Read the article from ABC 'Why Australia's government debts and budget deficits are here to stay' and answer the following questions:

a) Using the AD-AS framework discussed in class, demonstrate the impacts of spending on infrastructure and a tax cut on output and inflation in the shortrun.

b) Also explain the likely impact of spending on infrastructure on output in the long-run and show this on your AS-AD diagram.

c) Explain (using your own words) what would happen to unemployment and output in the short run if job support payments (both Jobseeker and Jobkeeper) were switched off.

7. If the govt. wants to decrease RGDP by $40 billion and MPC equals 0.8, how much must the govt. increase taxes?_______8. If the MPC equals 0.9 and the Pres. and Congress increase fiscal spending by $60 billion, how much will RGDP increase? _______9. If the MPC equals 0.8 and the Pres. and Congress decrease income taxes by $60 billion, how much will RGDP increase? _______10. If the MPC equals 0.75 and Pres. & Congress increases taxes by $30 billion and decreases govt. spending by $30 billion, how will RGDP change?_______

When the U.S. Government proposes a fiscal stimulus package during a recession there is usually a debate in Congress as to whether the Government should: 1) increase spending directly such as building bridges and schools; or 2) reduce personal income taxes. Using the concepts of U.S. GDP accounting based on the expenditure approach: (p. 749 ch 30)

1. Explain why each of the two options would have a different initial impact on U.S. GDP
2. How could the positive expenditure impact on U.S. GDP from the actual spending stimulated by the fiscal package diminished?

Shan Foods Pvt Ltd. factory overhead rate is Rs. 3 per hour. Budgeted overhead for 3000 hours per month is Rs.16000 and at 7000 hours is Rs.24000. Actual FOH for the month is Rs.18000 and actual volume is 5000 hours.
Required:

1. Variable overhead rate.

2. Budgeted fixed overhead.

3. Normal capacity hours.

4. Applied factory overhead.

5. Over or under applied factory overhead. What can be the possible reasons for the over or under applied FOH? And what measures should company take to overcome over applied FOH in future?

6. Spending Variance. What are the causes of unfavorable spending variance? And what measures should company take to reduce unfavorable spending variance in future?

7. Idle Capacity Variance. What are the causes of unfavorable idle capacity variance? And what measures should company take to reduce unfavorable idle capacity variance in future?