3. Suppose an economy is represented by the following equations. Consumption function C= 200 + 0.8Yd Planned investment I= 400 Government spending G= 600 Exports EX= 200 Imports IM = 0.1Yd Autonomous Taxes T= 500 Marginal Tax Rate t=0.2 Planned aggregate expenditure AE = C+I+G+ (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy

3. Suppose an economy is represented by the following equations. Consumption function C= 200 + 0.8Yd Planned investment I= 400 Government spending G= 600 Exports EX= 200 Imports IM = 0.1Yd Autonomous Taxes T= 500 Marginal Tax Rate t=0.2 Planned aggregate expenditure AE = C+I+G+ (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

See similar textbooks

Similar questions

Suppose an economy is represented by the following equations.Consumption function C = 200 + 0.8YdPlanned investment I = 400Government spending G = 600Exports EX = 200Imports IM = 0.1YdAutonomous Taxes T = 500Marginal Tax Rate t=0.2Planned aggregate expenditure AE = C + I + G + (EX - IM) By using the above information calculate the equilibrium level of income for this economy and explain why fiscal policy becomes less effective in an open economy
3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households is $10 billion, household consumption is $18 billion, and the marginal propensity to consume (MPC) is 0.8. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 0 5 + + + 10 15 20 25 30 35 40 DISPOSABLE INCOME (Billions of dollars) O $25.2 billion $26.8 billion $24.4 billion 45 0.8, Suppose now that country's national income increases to $34 billion. Assuming the amount paid in taxes is fixed at $10 billion and that MPC = what will be the new household consumption? $21.2 billion 50 Consumption Function (?)
Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. (a) Find out the equilibrium value of income. (b) What is the value of export multiplier?
Suppose an economy is described by the following equations: Y = C + I + G + X – M C = 14 + 0.60Yd I = 20 G = 20 X = 15 M = 5 +0.1Y T = 20 + 0.4Y Where Y is domestic income Yd is private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending G is government spending E represents exports M represents imports of goods and services. (a) If the equilibrium national income is less than the full-employment level of income by N$100, what should be the increase in government spending or in exports to attain the full-employment level of income? (b) With a help of a diagram explain and discuss life cycle hypothesis.
Q1:You are given the following income-expenditures model for an economy : Consumption C = 300 + .64Yd Tax (T) = $60 Government expenditure G = $100 Investment (I) = $120 From above data calculate the follows: 1. Equilibrium level of income 2. At the equilibrium level of income, what is the amount of consumption?
1. Suppose the households in a hypothetical economy has the following consumption function C= a + cYd. Where is the disposable income. The government in this economy imposes a tax rate of to households’ income (ex. A means that 10% of households’ income goes to tax payments). a. What is the equation that describes the disposable income of households? b. What is the Planned Expenditure Equation? Assume that government expenditure is exogenous and Investment function is given by the equation I = I-br Where is the interest rate. c. Derive the equilibrium output in the goods market and show that the multiplier in this model is 1/1c(1-t). d. How does and the tax rate affects this multiplier (e.g., what happens to multiplier if c increases cet.par. , or if tax rate increases, cet.par)?
15) Given the income and consumption data shown in the table below, what is the spending multiplier ?
25 1 Calculate the equilibrium level of investment if you have the following equations: C=0.4Yd+20, national income is 1000, government expenditures is 200, tax is 50 Investment =300 O Investment-D350 O Investment3D400 O Investment3D450 O None of the above O
B) In a closed economy, the functions for consumption, investment, government expenditure and taxation are given as below (in RM million). Consumption function : C=500 + 0.75 Yd Investment function | = 800 Government expenditure :G = 400 Тахation :T= 200 + 0.2 Y i. Find the equilibrium level of national income for the economy stated above. ii. Draw a graph to show the equilibrium of national income by using AD=AS approach. Find the total value of taxation when the national income is at equilibrium. iii.
Calculate the equilibrium income by using the consumption function formula. 1. Y =C 2. Y= C+I 3. Y = C+I+G 4. Y= C+I+G+Nx Given: C = 100; I = 150; G = 100; m= 50; x=35; change in DY = 900; change in C = 630
good day. can you assist on the following question below USE THE FOLLOWING INFORMATION C=R60 MILLION, I = R280 MILLION; GOVERNMENT= R 310 MILLION c=0.75 TO:- CALCULATE THE AUTONOMOUS EXPENDITURE CALCULATE THE EQUILIBRIUM LEVEL OF INCOME DRAW A GRAPH TO ILLUSTRATE THE EQUILIBRIUM
Suppose the following table shows the components of aggregate expenditure for an economy when disposable income is $200 billion and when it is $400 billion: Disposable Income $200 billion $400 billion Consumption $300 billion $400 billion Investment $100 billion $100 billion Government Purchases $175 billion $175 billion Net Exports $200 billion $180 billion Aggregate Expenditure $775 billion $855 billion On the following graph, use the blue curve to plot government purchases as a function of disposable income: