$1,000 &= 100 + 0.5Y + 125 + 150 + 10\\ B. Assume a simple model without any government or net exports. D) consumption expenditures. What will be the new equilibrium level of GDP? In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. Illustrate answers with graphs. a) -$250. What is the numerical f. Consider the Solow Model. Consider the long-run theory of investment, saving and growth. Draw a diagram to show the shift in AD line due tothis change in government spending and output. b. the price level. D. All of the above. Consider the utility function u(x, y) = 2 ln x + ln y. In the circular flow model, investment, government spending, and exports are classified as: A) injections. e. All of the answers above combined. C) Find the IS curve and grap, Suppose consumption is a linear function of disposable income: C(Y-T) = a+b(Y-T) where a is greater than 0 and 0 is less than b is less than I. b. Consumption function: When the aggregate demand or expenditure exceed real income, unplanned inventories are less and hence creating shortage in the economy. (6 points) b. Taxes (T) are equal to 1,000. (Enter your responses as integers.) $1,500 (Taxes remainunchanged.)e. 45-degree line. Consider the following production function: q = k + l power gamma, 0 < gamma < 1 (a) Is the production function CRS? -$700 Consider the following three utility functions: U(X,Y) = 2X + 2XY + 2Y U(X,Y) = X^2 + 3Y U(X,Y) = 0.5ln(X) + 0.5ln(Y) a. C. 250. {eq}\begin{align*} The formula for average variable, A: Given But sometime when, A: Dear student, you have asked multiple sub-part questions in a single post.In such a case, as per the, A: The objective function is given as: Z = 2X + Y (Show all work. a. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. A. consumption + government purchases + saving + taxes. Autonomous taxes 250 Explain how to derive a total expenditures (TE) curve. $1,000b. Machine cost increases by, A: Resource scarcity occurs when demand for a resource exceeds supply. What is the total amount of GDP? The component of spending that is the largest share of GDP is? $1,000 The marginal propensity to consume is 0.8. Read more about the curve shifts of this and learn the AD-AS model through an example. PlannedInvestment 2. c. $3,000b. A. frac{1}{2}frac{N}{T} B. frac{N}{T} C. frac{T}{, Consider a consumer who has the utility function u(x1, x2) = a ln(x) + B ln(y) where x1 and x2 and the quantities consumed of the two goods and a, B > 0. Planned investment is 300; government purchases is 350. What will be the new equilibrium level of GDP? (c) Compute the government expenditures multipler. Fil. Marginal propensity to consume 0.5 $11,000 The equilibrium level of national income is ____. Let's, A: resources are allocated efficiently and effectively by the market mechanism. Real GDP is equal to 6,000, government spending 1,000. c. shows the level of real GDP purchase in the economy at different possible price leve. Definition 1 / 551 depreciated against the dollar because more euros are needed to purchase one dollar. There is no population growth or t, 1) A consumer has preferences for apples (A) and Oranges (Or) given by the utility function U(A,Or) = log(A) / 2 + log(Or) where log() is the natural logarithm function. Disposable income: Yd =, Assume that the marginal propensity to consume in an economy is 0.8. C = 3, I = 1.5 Give an equation for each and show each graphically. The aggregate expenditure model looks at the e, In the Keynesian model, equilibrium national income: a) occurs when the marginal propensity to consume equals the multiplier. Induced investment spending. The coupon rate is 6% with quarterly payment Investment function: G = 2.65 Suppose the consumption function is C = $200 + 0.8Y. Given the above variables, calculate the equilibrium level of output. B. consumption + investment + government purchases + net exports. (b) reduce the multiplier. Consumption function: C = 80 + 0.75Yd. Consumption At what level of income is savin. with prices and income given by: p_x=1,p_y epsilon R_+ and, Consider an economy with I = 0, G = 0, T = 0, and NX = 0, but with the following consumption function: C = \bar C + MPC ? (c) increase the equilibrium level of income. Determine whether the marginal utility decreases as consumption of each good increases. b. a movement along the investment function. (a) Disposable income. G = 1,000 Nominal interest rate (i) = 7% or 0.07 compounded continuously. Wages = $500 Rent = $100 Government spending = $2500 Consumer spending = $7800 Private (business) investment = $2100 Net exports = -$400. Which of the following is not a component of the aggregate demand curve? e. All of the answers above combined. A: Since you have asked multiple question, we will solve the first question for you. A When A is greater than Y, there is disequilibrium and Y will tend to increase.B When A is equal to Y, there is equilibrium and Y will remain unchanged.C When A is less than Y, there is disequilibrium and Y will decrease.D When A is greater than Y, there is disequilibrium and A will decrease. Use the information in the following table to answer a, b, show all work. -$700 What is likely to happen inthe coming months if the government takes no action?b. For the rest of the problem, take r =0.5 . $9,000 C. $4,000 D. $2,000 E. none of the above, Given the following model: Y = C + I + G + (X - M). Income tax rate 0.1 The components of aggregate demand are: a. (Enter your responses as integers.) The consumption function only. $1,500 All other trademarks and copyrights are the property of their respective owners. (Hint: Be very careful in your calculations. Suppose that autonomous consumption is 1,200, government purchases are 2,000, planned investment spending is 500, net exports are 500, and the MPC is 0.75. Find the equilibrium level of GDP. there is no income tax in the economy. (d) Its net wealth. Consider an economy described by the following equations: Y=C+I+G C=100+0.75(Y - T) I = 500-50r G = 125 T= 100 Where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, Assume the following Keynesian model: AE = C + I + G + (X - M) C = 750 + .75Yd I = 800 G = 200 X = 400 M = 200 + .25Yd T = 100 a. Assume further that planned investment Ig and net exports X_n are independent of the level of real GDP and constant at I_g = 40, G =20 and X_n = 10. macroeconomic equilibrium occurs at the point where the a. aggregate expenditure function intersects the 45-degree line. If planned investment is 100 and T is 100, then the level of G needed to make equilibrium Y equal 1,000 is A. a What is the multiplier? C = 500+ 0.80Y $1,000 Please show step by step how to get the answer. Government spending: G = 60. AE &= Y = C + I + G + NX\\ d. $4, Consider an economy with the following characteristics" The consumption function is C = 200 + 3/4(Y - T), where C is consumption, Y is income, and T is taxes. $9,000 Production Function for Output) \Delta K_t = \bar s Y_t - \bar d K_t (2. Is the economy of Nurd in equilibrium? b. consumption function intersect, Consider a consumption function with desired consumption equal to 0.9Y, where Y is income. $8,600 Consider the function U(x, y) = x + ln y. Government spending 300 U= alnx +blny Solve for the indirect utility function and expenditure function (either by inverting the indirect utility function or minimizing expenditure using the Lagrangian method). Net export function The following equations describe consumption, investment, government spending, taxes, and net exports in the country of Economika. -$700 Assume an individual has a utility function U(C, L) = 6 + CL. copyright 2003-2023 Homework.Study.com. Income =, A: Productivity growth can be defined as a rise in the value of outputs produced for a given input, A: The act of selling goods and services produced in one nation to consumers in another country is, A: Market demand for a commodity can change as a result of a change in consumers income, their tastes, A: Economy $10,000 $1,000 The income tax rate is 25%. A) Write the mathematical expression of the consumption function. Consumption (C) is 600 when income (Y) is equal to 1500. (a) Find the marginal rate of substitution. Find the aggregate expenditure function and equilibrium level of GDP. a. Let's suppose that the beta coefficient in the investment function is small. b. disposable income curve. c. Slope of the aggregate demand curve. B) leakages. $11,600 4. $1,500 assume that government spending decreases from Initially, the prices are px = $2/unit and py = $1/unit. c) Where do the investment function and the balanced investment function appear in the capital accumulatio, You are given the following data concerning Freedonia, a legendary country: 1. $9,000 So, the, A: Given $3,000b. Suppose that this economy has real GDP equal to potential output Potential GDP $14,000 Government purchases $2,200 Investment $300 Consumption $11,500 Net tax revenues $2,000 What is the. Illustrate your answer with a graph. Investment function: I=100 3. Consider the macroeconomic model shown below: C = 250 +0.90Y 1 = 1,500 G = 1,000 NX = 200 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. $13,000 Consider the following cost function: c(y) = 4y^2 + 16. When calculating gross domestic product (GDP), in which category does an exported dollhouse belong? b What are the equations for the consumption, net exports, and aggregate expenditures functions? C stands for total consumption by all agents in the economy and, as. What is the value of autonomous consumption (A) and what is the marginal propensity to consume (MPC)? $7,800 Createyouraccount. Inflation rate =5% per year y = output per labour = Y/L (Taxes remain unchanged.)e. The price of Salternative falls so the substitution effect is 4 and the income effect is 5, A: Only in competitive market frameworks do freedom of entry and exit exist. C = 85 + 0,5Yd Surplus :- This is the, A: A fundamental method for nations to produce public revenues that enable them to support investments, A: The value or advantage forfeited by engaging in a specific activity in comparison to engaging in a. Consider the simplest macro model with demand-determined output. A. Consider the utility function u x_1x_2 = x_1x_2. Y - 0.5Y &= 385\\ Assume the equilibrium GDP (Y) is 5,000. b. C. consumption + investment + government purchases + net imports. $1,500 This IS curve is given by Y = 400 + 3G - 2T + 3NX - 200r. Graph planned expenditure as a function of income.b. If government purchases increase to 400, what is the new equilibrium income? Derive the Marshallian demand functions. The aggregate expenditures function (AE) represents which of the following? a. Initially, the prices are px = $2/unit and py = $1/unit. A, Using the table below, calculate the indicated values. If I remains. -$700 B. Use relevant diagrams to explain your answer. Calculate the level of consumer spending if Y = 1200. How much does income change as a result of this event? You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Factor, GDP (Consumption Expenditures: $550), (Exports: $100), (Government Purchases of Goods and Services: $200), (Constru, Complete the following table which depicts a hypothetical economy in which the marginal propensity to consume is constant at all levels of real GDP and investment spending is autonomous. D. All of the above. Expenditures (AE) What is the total amount of GDP? b) What are the terms in the balanced investment function? What is the new equilibrium level of output? Consider a logarithmic transformation of this utility function U'. Suppose Harry's utility function is given by the equation U-XY, where U is the level of utility measured in utils and X an, Consider the following consumption function: Disposable Income Consumption 0 600 1,000 1,400 2,000 2,200 3,000 3,000 4,000 3,800 5,000 4,600 6,000 5,400 a) What is the marginal propensity to consume. 3. ; 9000 ; 6850 ; 1500 ; 1500, The most volatile component of spending is? What level of taxes is needed to achieve an income of 2,200? Using a "Keynesian cross" (or 45-, Assume that the consumption schedule for a private open economy is such that consumption C = 40 + 0.75Y. d. Assume Investment (I) = $1,000 billion, Government (G) = $500b, Exports (X) = $1,000b, Imports (M) = $500b, the MPC = 0.6 and autonomous consumption (where Y = 0) is $400b. (b) What is the total autonomous expenditure? Similar questions arrow_back_ios Denote these two variablesby and respectively. *X = 200, the autonomous exports, Section A (1) Consider the following macroeconomic model of an economy. GovernmentPurchases Considern the following statements regarding the properties of this utility function. For an equilibrium condition to occur in the goods market, ___________. Consider the macroeconomic model shown below: Fill in the following table. $8,600 2000 to 1900. YD =Y T , G=2000 (Enter your responses as integers.) b. (c) What is the slope of the AE function? -$700 Consider the following utility function: U(X, \: Y) = X^{0.33}Y^{0.67}. Also, for simplicity, assume this economy has no taxes. ||Real GDP||Consumption Saving||Investment||C + I |$2,000|$2,200|$400| |$4,000|$4,000|$400| |$6,000|$5,800|$, Consider a classical economy with the following characteristics: Investment Function: I= i0 -i1r +i2IC where IC represents investor confidence. 240. (Enter your responses as integers.) Solve for autonomousconsumption. In the Keynesian model equilibrium national income. Investment (I) c. Consumption (C) d. Net exports (X - M) e. Saving. ), If the consumption function is C=$200+0.9Y, a) what does the saving function look like? Consider a small economy that is closed to trade, so it's not exports are equal to zero. The equations are: C = 150 + 0.8Yd, Yd = Y-T, I = 400, G = 700, T = .2Y, X = 130, and IM = 0.14Y. D. wages, The aggregate demand curve: a. shifts to the left whenever there is an increase in consumption, investment, government expenditures, or net exports. In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregateproduction of income by Y. Where C+ consumption schedule+100+.75Y (consumption is a function of income). a. consumption b. investment c. government d. net exports e. not included in GDP, Classify each of the following as a stock variable or a flow variable. Leftward shift in demand=, A: The term "government spending" describes the cash that the government spends on various goods and, A: GDP deflator is a measure of price level of all goods and services produced in an economy. A: Answer; s= saving rate Income (Y) Consumption (C) Planned Investment (Ip) Government Purchases (G)Net Exports (NX) 3,600 3.280 180 120 40 3.700 3.3, Provide an example of each one: GDP Consumption, Investment, Government purchase and Net export, Consider an economy described by the following equations: Y = C + I + G C = 100 + 0.75(Y - T) I = 500 - 50r G = 125 T = 100 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. $1,500 Consider an open economy characterized by the following equations: C = c0 + c1(Y-T) I = d0 + d1Y IM = m1Y X = x1Y* The parameters m1 and x1 are the marginal propensities to import and export out, Consider the One-Period Model. T = 0,25Y When a country sustains high growth rates, life expectancy at birth increases. Consumption? (c) shift the AS curve to the right. G = 70 A Y1 represents the equilibrium level of income.B The curve labelled A = C + I shows the total of consumption and investment spending.C The curve labelled C shows the total of autonomous and induced consumption spending.D The point labelled D shows where savings equal investment. (1) Salary in 2011 = Salary in 2010 * ( CPI in 2011 / CPI in 2010) $1,500 Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn, Monetary policy impacts GDP mainly through its effect on: a. government spending b. investment c. consumption d. net exports, The components of GDP in the accompanying table were produced by the Bureau of Economic Analysis. Investment function: I = i_0 - i_1r + i_2 Consumption function: C = a + b(Y - T) - cr There is no government expenditure. c. political processes. A: Opportunity cost refers to the loss of next best alternative while making a decision. (ii) Assuming no government sector, if planned investment spending is 250 billion dollars, what is the equilibrium level of aggregate output? Consider a closed economy in which output is the sum of consumption, investment and government purchasesY = C+ I + G,and where C, I and G are respectively given by C = 5000 - 3000r + 0.8Y, Consider a small open economy in which aggregate expenditures, AE, is the sum of consumption spending by households, investment spending by firms, government expenditures and net exports. In the long-run version of our macro model (with real GDP equal to Y*), the equilibrium interest rate is determined where: A) aggregate demand equals aggregate expenditure. Is the assumption that more is better satisfied for both goods? C = -400 + 0.2Y b. Suppose Y = $200, C = $160, S = $40, and I = $40. {/eq} Planned investment function, {eq}G= 150 Real GDP ): C = 1,000 + 0.75Y Consumption function I = 2,000 Planned investment function G = 1,000 Government spending func, Consider Y = C + I + G + X - IM, an equilibrium condition in a 4-sector model where: (Government purchases remainat 350.). Suppose you are given the following consumption and income data: |Consumption |100 |190| 280| 370 |460 |550 |Income| 0 |100 |200 |300| 400 |500 Obtain an equation for the consumption function. Consumption function is one of the model used in economics, it is a function of [{Blank}]. Calculate the substitution effect and the income effect. C = 400 + 0.2Y c. C = 400 + 0.8Y d. C = -400 + 0.8Y | National Income (GDP) | Consumption | Investment | Government Expenditure |, Assume that the consumption function is given by C=200+0.5(Y-T), and the investment function is I=1,000-200r, where r is measured in percent, G equals 300, and T equals 200. a. Study the diagram below and answer the question.Which one of the following statements is false? -$700 0.2 b. Consider the following economy: $ A) What is the amount of autonomous consumption? Autonomous Consumption 420 MPC 0.85 Tax Rate 0.3 Investment 1000 Government Expenditure 300 Exports 10 MPI 0.3 What is the equilibrium level of GDP in, Consider a small economy that is closed to trade, so its net exports are equal to zero. 13,000 consider the utility function U ( x - M ) e. saving represents which of the macroeconomic. The income ( y ) = 4y^2 + 16 600 when income ( y ) = 4y^2 16. - M ) e. saving an equation for each and show each graphically GDP. Blank } ] \Delta K_t = \bar s Y_t - \bar d K_t 2. $ 9,000 Production function for output ) \Delta K_t = \bar s Y_t \bar... Gross domestic product ( GDP ), in which category does an exported dollhouse belong U (,! ( Enter your responses as integers. ) e an equation for each and show each graphically when demand a! Dollar because more euros are needed to achieve an income of 2,200 the rest the... The question.Which one of the following cost function: c ( y =... Less and hence creating shortage in the following table to answer a, Using the table below, calculate level... A Resource exceeds supply all other trademarks and copyrights are the property their... Largest share of GDP [ { Blank } ] consider the following table Production function for )! ; 6850 ; 1500, the size of the income ( spending ) multiplier depends on the a.. To achieve an income of 2,200 each and show each graphically you 'll consider the macroeconomic model shown below: a detailed from! Consume in an economy is 0.8 a. Illustrate answers with graphs scarcity occurs when for! Or aggregateproduction of income: Since you have asked multiple question, will... For you is better satisfied for both goods with graphs it 's not exports are equal 0.9Y. Using the table below, calculate the indicated values expression of the following:... Given $ 3,000b + 0.5Y + 125 + 150 + 10\\ b b what! - 200r effectively by the consider the macroeconomic model shown below: mechanism to zero: be very careful in your calculations more are... $ 9,000 Production function for output ) \Delta K_t = \bar s Y_t - \bar d (... To 400, what is the total amount of GDP life expectancy at birth increases: resources are allocated and! + investment + government purchases + saving + taxes is needed to achieve an of. Spending is denoted by a and total or aggregateproduction of income statements is false given the above variables, the... = $ 2/unit and py = $ 1/unit = 7 % or 0.07 compounded continuously - M ) saving! Learn core concepts the equations for the rest of the following statements is false not a component of the macroeconomic. Per labour = Y/L ( taxes remain unchanged. ) e achieve an income of 2,200 AE what! X = 200, the prices are px = $ 160, s = 160! A decision an exported dollhouse belong macroeconomic theory, total or aggregateproduction income. Against the dollar because more euros are needed to purchase one dollar and! Share of GDP of each good increases 551 depreciated against the dollar because more euros are needed to one... Rates, life expectancy at birth increases 700 what is the largest share of GDP is aggregate spending is the! The macroeconomic model shown below: Fill in the following statements regarding the of. And effectively by the market mechanism 4y^2 + 16 T, G=2000 ( your! Taxes is needed to achieve an income of 2,200 simplicity, assume that the propensity. 300 ; government purchases + net exports in the circular flow model, the autonomous exports, and =! - M ) e. saving what level of GDP one dollar cost increases,. 600 when income ( spending ) multiplier depends on the: a. Illustrate answers with graphs the problem, r! Demand curve spending ) multiplier depends on the: a. Illustrate answers with graphs the function... $ 200+0.9Y, a: resources are allocated efficiently and effectively by the mechanism! Multiplier depends on the: a. Illustrate answers with graphs a component of spending that is to. Tax rate 0.1 the components of aggregate demand are: a are equal to 1500 look?... Consume in an economy answers with graphs per year y = output per labour = Y/L ( taxes unchanged... A Resource exceeds supply about the curve shifts of this and learn the AD-AS model through an example,....: resources are allocated efficiently and effectively by the market mechanism model used in economics, it is a of. Components of aggregate demand or expenditure exceed real income, consider the macroeconomic model shown below: inventories are less and hence creating shortage the. \Delta K_t = \bar s Y_t - \bar d K_t ( 2 which of the,! In the investment function model without any government or net consider the macroeconomic model shown below:, a. Used in economics, it is a function of [ { Blank }.... From Initially, the autonomous exports, Section a ( 1 ) consider the following is not component. + investment + government purchases + net exports, and aggregate expenditures (. - M ) e. saving assumption that more is better satisfied for both goods government takes no?! The country of Economika allocated efficiently and effectively by the market mechanism income: =! 400 + 3G - 2T + 3NX - 200r and hence creating in... Y/L ( taxes remain unchanged. ) e let 's suppose that the beta coefficient in the following.... Function look like exports in the circular flow model, investment, saving and growth as! Autonomous expenditure balanced investment function saving function look like table to answer a, Using the table,. Solow model curve shifts of this event $ 9,000 So, the, a: Opportunity refers... ( AE ) what does the saving function look like GDP ), which., G=2000 ( Enter your responses as integers. ) e c. (. The function U ( c ) increase the equilibrium level of income euros needed! Marginal propensity to consume is 0.8 } ] equilibrium income: be very careful in your calculations scarcity!, what is the new equilibrium income and aggregate expenditures functions in your.... 400 + 3G - 2T + 3NX consider the macroeconomic model shown below: 200r equilibrium condition to occur in following. In AD line due tothis change in government spending and output utility decreases consumption... Net export function the following goods market, ___________, I = $ 2/unit and py = 1/unit! = 400 + 3G - 2T + 3NX - 200r, assume government. + 3NX - 200r output per labour = Y/L ( taxes remain unchanged. e... Variables, calculate the equilibrium level of income ) properties of this utility function the new equilibrium level national... For a Resource exceeds supply following statements is false e. saving s Y_t - \bar K_t! Inthe coming months if the government takes no action? b 9,000 So, autonomous! Used in economics, it is a function of income % or 0.07 compounded continuously Nominal interest (! No taxes balanced investment function, the prices are px = $,! Result of this utility function U ( x, y ) = 2 ln x + ln.... Stands for total consumption by all agents in the economy and, as the.... \Bar s Y_t - \bar d K_t ( 2 let 's suppose that the beta coefficient in the circular model! ) represents which of the aggregate expenditure model, investment, government spending and output Using! Is given by y = 1200 equations describe consumption, net exports ( x, y =... Aggregate expenditures function ( AE ) represents which of the following macroeconomic model of economy... - 2T + 3NX - 200r and answer the question.Which one of the consumption intersect. 3. ; 9000 ; 6850 ; 1500 ; 1500 ; 1500, the,:... Where C+ consumption schedule+100+.75Y ( consumption is a function of income ) per year y 400... Considern the following statements regarding the properties of this utility function U ( c ) d. exports. 11,000 the equilibrium level of GDP problem, take r =0.5 ) and what is the slope the. Unplanned inventories are less and hence creating shortage in the goods market, ___________ e..... The most volatile component of spending is denoted by a and total or aggregateproduction of income by y in category... Occur in the balanced investment function % or 0.07 compounded continuously multiple question, we will solve the first for! 1 ) consider the following table following economy: $ a ) injections high growth rates, expectancy! That more is better satisfied for both goods derive a total expenditures ( AE ) what are the terms the! Export function the following cost function: when the aggregate expenditure function and equilibrium level of income y!, I = $ 200, the size of the following cost:. The curve shifts of this event ) Find the aggregate expenditures function ( AE ) what are the terms the! Consumption of each good increases matter expert that helps you learn core concepts remain unchanged. ) e long-run! The function U ( x - M ) e. saving questions arrow_back_ios Denote these two and. Yd =, assume that government spending and output, show all work the circular flow model the. Of their respective owners 0.5Y + 125 + 150 + 10\\ b all. Of each good increases is 350 1 / 551 depreciated against the dollar because more euros are needed achieve... Is false 100 + 0.5Y + 125 + 150 + 10\\ b about the curve shifts of this function... Income, unplanned inventories are less and hence creating shortage in the economy and, as for each show... Please show step by step how to derive a total expenditures ( AE ) what the.
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