10. We consider the IS model where investment is given by = ā¡ - b(R-7). An increase in the coefficient ā¡ the government purchase multiplier. Raises b. Reduces Does not affect d. Raises if R > F e. Raises if R
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- 30. Given this model, what would be the change in equilibrium level of income were G to increase to 250? 31. Given this model, what would be the new equi8librium level of income were Investment spending to decline by 50?Consider first the goods market model with constant investment that we saw in Chapter 3. Consumption is given by C = c0 + c1(Y - T) and I, G, and T are given. a. Solve for equilibrium output. What is the value of the multiplier for a change in autoomous spending? b.Now let investment depend on both sales and the interest rate: I = b0 + b1Y - b2i Solve for equilibrium output using the methods learned in Chapter 3. At a given interest rate, why is the effect of a change in autonomous spending bigger than what it was in part a? In other words, why the multiplier is now bigger?Assume in country Y, the average marginal propensity to save is 0.2. When the aggregateincome is zero, consumers spend 50 to consume. Derive the saving function and consumptionfunction for this country. What happens to consumption when the propensity to savedecreases to 0.1? Explain your answer and show this on the graph.
- If the simple spending multiplier is 8, the marginal propensity to consume is O a. 8 1/4 wered c. 7/8 d. 1/8 e. 4/5The partial data in the table below are for the economy of Arinaka. Planned investment, government spending, and all taxes are autonomous. You may assume that the MPC, MPS, and MPM are constant. a Fill in the blanks intable below YD Unlanned Investent AE $600 $80 $480 $40 $80 370 $30 650 45 700 750 b. The value of equilibrium income is $ C. If planned investment decreases by $20, the new value of equilibrium income is $Consider this economy: C = 100 + 0.5Y |= 400 + 0.1Y Drag and drop options on the right-hand side and submit. For keyboard navigation... SHOW MORE V Marginal propensity to consume 1000 Multiplier 0.5 Income of equilibrium 500 Consumption of equilibrium 1250 Investment of equilibrium 2.5 600 525 725 II II II II II II II II II
- The following table illustrates the multiplier process In a private closed economy. Change In Income Change In Change In saving consumptlon %$. Assumed Increase In Investment $20 $4 Second round $. $12.80 $. All other rounds $. $. $51.20 $. $. $20 Totals Refer to the above table. The marginal propensity to consume Is: Multiple Cholce 75. 9. .5.Income and Expenditure – End of Chapter Problem An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure cquilibrium GDP, cquals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you cxpect the total change in Y* to be bascd on the multiplicr formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) = billion d. How do your answers to the change in GDP and Y…Find the multiplier effect. when the consumer spends 0.6 and save 0.4 of every 1 SAR of extra income. a. if MPC -0.2 b. if MPC-0.3 Cif MPC -0.4 d. if MPC-0.5 e. if MPC-0.6 6. if MPC -0.9
- Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.We found that for every $1 increase in G there is a multiplied impact on output with, in the most 1 basic model, a multiplier of A study by economists at the New York Fed conducted 1- MPC during the COVID-19 recession found that "as of the end of June 2020, a relatively small share of stimulus payments-ljust] 29 percent-was used for consumption." What is the G multiplier based on that estimated MPC and the formula from the basic model?Given that the marginal propensity to cinsume is 0.8 and that the initial change in investment expenditure equals $100 million. (a). Calculate and explain the numeric value of the autonomous investment multiplier? (b). Calculate the resultant change in equilibrium national income?