If TR increases by 100 and MPC is 0.2, how the Aggregate Expenditure would change (in a simple Keynesian model without money market)? 1)Aggregate expenditure falls by 100 2)Aggregate expenditure increases by 20 3)Aggregate expenditure falls by 20
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If TR increases by 100 and MPC is 0.2, how the Aggregate Expenditure would change (in a simple Keynesian model without
1)Aggregate expenditure falls by 100
2)Aggregate expenditure increases by 20
3)Aggregate expenditure falls by 20
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- Complete the statements and then calculate the change in consumption. The consumption function shows the relationship between consumption spending and The slope of the consumption function is the Changes in consumption can be predicted by multiplying the change in by the If the MPC = 0.80 and disposable income increases by $1000, then consumption will increase by what amount? Assume that there is no multiplier effect.Calculate autonomous consumption expenditure from the following date about an economy which is In equilibrium.National income = Rs. 1,100Marginal propensity to save = 0.20Investment expenditure = Rs. 80(Autonomous Consumption Expenditure = 120Consider the non-linear aggregate consumption function: C = 0.05Y²+ Y + 80 (Where, C = aggregate consumption and Y = aggregate income). a) Find the marginal propensity to consume (MPC) and the average propensity to consume (APC). b) What is the relationship between MPC and APC in this case? c)What happens to the MPC as Y becomes larger and larger? Is it likely that an aggregate consumption function would have this functional form? d) Find the elasticity of the consumption function and show that it equals the MPC/APC. e) Illustrate your solutions to (b) and (c) graphically, showing the consumption function, the MPC and APC.
- Suppose that autonomous consumption is 2,190, government purchases are 590, taxes are 0, planned investment spending is 648, net exports are -132, and the MPC is 0.71. What is the value of autonomous spending? Round your answer to the closest 2 decimal places if needed. Do not enter dollar signs ($) in your answer.Consider an economy where the various components of expenditure follow these equations: C = 10 + 0.8Yd I = 500 G = 100 X = 300 М — 0.1Y T = 0.1Y c. Calculate the equilibrium level of GDP in this economy, highlighting what are the values of the Keynesian multiplier and the autonomous components of expenditure.What happens in the simple Keynesian model if households expect lower income in the future and decide to save more today? Adjust the graph and answer the question. Assume that investment varies directly with aggregate income. Aggregate expenditure (in billions of dollars) 10 9 8 7 5 4 3 2 1 0 0 1 2 3 4 5 6 7 Aggregate income (in billions of dollars) 8 9 AE = AI C+1 10
- According to Keynes's Consumption function, a) Consumption spending is a function of disposable (after-tax) income (Yd). b) There cannot be any consumption without disposable income. c) Total consumption spending is composed of autonomous consumption, independent of income (Ca), and induced consumption, determined by disposable income. d) The induced consumption component is equal to a constant proportion of disposable income. e) The induced consumption is equal to the marginal propensity to consume times disposable income f) The consumption function Is modified in the Lecture Notes to a simplified version where consumption is a function of real income. g) Autonomous consumption cannot be changed by other factors.An economy is described by the following equations: C = 1,800+ 0.6 (Y - T) IP = 900 G = 1,500 NX = 100 PAE= T = 1,500 y* = 9,000 a. Find a numerical equation linking planned aggregate expenditure to output. Instructions: Round the value for mpc to one decimal place. Y b. Find autonomous expenditure and induced expenditure in this economy. Instructions: Round the value for mpc to one decimal place. Autonomous expenditure: Induced expenditure:Find the value of the multiplier when the MPS equals to 0.70
- Calculate the value of consumption expenditure from the following:- National income = $6000 Autonomous consumption = $1000 Marginal propensity to consume = 0.80Why can’t an economy with an MPC greater than 1 reach a stable equilibrium in the aggregate expenditure model?Answer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?
