Suppose the lowest level of the output gap during the Great Recession was -6 percent in July 2009. Many people believe that the multiplier used in the IS curve was 1.8. Assume Rt = r and that monetary policy is not being used, what would the percent
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- Given the following informations; Consumption(C) 800+0.9Y, Where Y-Income Investment (I) =8000-800r, where r=interest rate Money Supply (Ms) =28500 Demand for Money (Md) =0.75Y-1500r and if the autonomous Investment decreased then %3D income decreased and interest rate increased. income increased and interest rate decreased. O income decreased and interest rate decreased income increased and interest rate increasedFiscal sales plan is $450,000,000 Fiscal GM% plan = 45% Goal is to increase GM $ by 4 million To still achieve the same dollar sales plan, calculate the new GM % you need to achieve to obtain the new GM $ plan To achieve the original GM% plan and the new GM$ plan, calculate the new sales $ plan: . Round % 1 place to the right of the decimal and include a % sign. Round GM $ to the nearest whole number (no cents), utilize comma's every 3 digits and include a $ signLet: C = consumption I = investment spending G = government spending Tx = tax revenue Yd= after-tax income MS = money supply MD = money demand r = interest rateAssume for a given closed economy:(i) Consumers spend $200 billion plus 80% of after-tax income, orC=200+0.8 Yd(ii) Investment demand varies inversely with the interest rate, such thatI= 500-2000r(iii) Currently government spending and taxes are both $250 billion, orG=250 and Tx=250,(iv) The total money demand or liquidity preference schedule for this economy is an inversefunction of the rate of interest and is given by the equationMD=850-1000r(v) The required reserve ratio for banks in this economy is 20%. No bank holds excessreserves, and everybody keeps their money in the bank. The total of reserves in the banks is$150 billion.Answer the following questions given the information above.d) The central bank wants national income to be $3000 billion. What must investment befor the equilibrium level of national income to be $3000…
- QUESTION TWOConsider the consumption function is given byC = 200 + 0.75YDWhere YD is disposable income Suppose that the economy faces an investment function of the formI = 200 – 25r.Suppose further that G =T = 100 and the money demand function takes the form(M/P) = Y – 100r.The money supply M is 1,000 and Price level P is 2Required:(i) Formulate the IS equation and the LM equation.(ii) Find the equilibrium interest rate and the equilibrium level of income. (iii) If government expenditure increases by 50, by how much does the IS curveshift? (iv) If the money supply increases by 200. How much does the LM curve shift?1. Suppose consumption C = 50 + 0.80 (YD), Government Purchases G = 50, Export X 20, inflation rate is 2.5%. The net tax rate, t = 0.25. The marginal propensity to %3D %3D import, m = income of 400? 0.2. What level of Investment is needed to achieve a target equilibriumull Telkom-StayHom... LTE 16:16 @ O 62% Today Edit 14:20 Q.1.7 An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is: (a) 0.6; (b) 0.5; (c) 0.3; (d) 0.4. A mg yt
- Which of the following can hurt economic growth in the short run but help it in the long run? O population growth O improved health and nutrition O enforcement of property rights O increased educational attainment O political stability Question 31 Assume the RRR is 8% and that the deposit creation multiplier works as described in class (i.e., the "simplified" deposit creation multiplier). What will be the total of deposits in the banking system resulting from an initial deposit of $1,000? O $8,000 O $5,000. $10,000 O $1,2503) If national disposable income increases by $20 million and consumption increases by $15 million, the marginal propensity to save is A) 4. B) 0.75. C) 0.5. D) 0.25.An economy is described by the following equations: Desired consumption cơ = 600 + 0.8(Y- T)- 500r. Desired investment /° = 400 - 500r. Real money demand L = 0.5Y- 200i, for i> 0. Government purchases G and taxes T both equal 1,000. The initial price level P equals 2.0, and expected inflation T İs zero. Full-employment output is 8,000. Notice that the real money demand function above is defined only for positive values of the nominal interest rate. We assume that, when the nominal interest rate equals zero, people are willing to hold as much money as the central bank wishes to supply; this assumption implies that the LM curve becomes horizontal for zero values of the nominal interest rate. a. What is the corresponding real interest rate for the full-employment level of output? r =
- Assume certain coutory economy consumption function =200+0.75(Y-T) given government purchase and Tax are 100 and investment function =100-25r real money demand =25y-100r money supply =1000 then find equilibrium income and interest rate when government purpose increase by 80 percent and tax increase by 70 percent draw IS and LM curve and by how much they shift ?2. Suppose, C=0.8(1-t)Y • t=0.25 •| = 900 – 50i • G=800 a) What is the equation for lIS curve b) What is the effect of increase in govt. expenditure by 100 on the IS equation & IS curve? Show the effect using graphs c)What will happen to the slope of IS curve if Investment becomes more sensitive to interest, say | = 900 – 60i ?Question 32 $75 150 225 Investment (5) O $150 Ⓒ$225 O $50 Price Level O $100 H Refer to the graphs, in which the numbers in parentheses near the AD₁, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. What is the desired level of investment spending in this economy if it is to achieve a noninflationary, full- employment level of real GDP? Investment Demand Q₁ Real GDP $50 100 150 Investment (5) AD, ($150) AD, ($100) AD, (550) 1p
