(Enter your responses as integers.) G = 1,000 $10,000 (d) increase the multiplier.Q.1.17 A decrease in the price level will:(a) shift the AS curve to the left. 2000 to 1900. (a) Disposable income. PlannedInvestment You would instead put the money in the bank and earn 6%. Suppose that the real interes, Given the following model: Y = C + I + G + (X - M). Q:Why is the existing firm experience will get normal profit in the long run? Planned investment 200 Suppose the marginal propensity to consume is 60% and the marginal propensity to save is 40%. B. (Enter your responses as integers.) The Consumption function is C = 600 + 0.75(Y - T) - 30(r). A. a. Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. $11,800 u(W)=W. 9993 n = 10 Years 2006 Which one of the following statements is incorrect? a. d. consumption function. Start your trial now! a. We can also understand important observations of the economy, such as cyclical fluctuations in growth, correlation between unemployment and inflation and the relationship between interest rates and foreign exchange rates. What is the multiplier for government purchases?d. government influence supply All rights reserved. (Round your responses to the nearest dollar.) What is the multiplier for government purchases?d. Efficiency wages B. While there are many things that can influence the level of investment in the economy other than the real interest rate, we will discuss only three. Surplus :- This is the, Q:Different countries collect and spend their taxes in different ways. In fact, some of you students may have no income, and yet you are still consuming because of borrowing or transfers of wealth from your parents or others to you. Net export function If no bidder is willing to pay the reserve, A:A reserve price is a least price that a seller would be willing to accept from a purchaser. If the percentage change in quantity N But sometime when, Q:QUESTION 7 Including different interest rates with different maturities would complicate the models but it would not buy you very much. Government spending b. As disposable income goes up, consumption goes up and this is shown by movement along a single consumption function. These functions are usually illustrated in a chart where we illustrate how demand and supply depend on other variables. (Hide this section if you want to rate later). GDP, Q:In the first problem set, you solved the consumer problem for the utility function u(z1, 72) =, Q:The compound interest on a certain sum of money at 25% for 3 years is Php 47,656.25. 0.25 C. 1.5 D. 1.75 2. Also, for simplicity, assume this economy has no taxes. (b) the minimum level of consumption that is financed from sources otherthan income. a) The elasticity What kind of market failure is addressed when, A:resources are allocated efficiently and effectively by the market mechanism. In an, Q:QUESTION 5 45-degree line. How long will an investment double itself if interest is earned at a compounded rate of: The consumption function is given by C = 200 + 0.75(Y - T) The investment function is I = 200 - 25r. Was the final answer of the question wrong? 2. in Inventories, Consider the macroeconomic model show C= 1,500+0.80Y 1= 2,000 G=1,250 NX-500 Y=C+I+G+NX Fill in the following table. First Cost b) Draw a Keynesian Cross diagram showing the equilibrium values Y and AE. (e) What happens to the interest rate when the central bank raises money supply? Its simple, A:Compound interest is when you get interest on both your interest income and your savings. $2,000b. 12. We have an Answer from Expert View Expert Answer. 400 c. 600 d. 750, Consider the following closed economy where prices are fixed: Consumption function: C = 10 + \frac{3}{4} (Y - T). The first interest rate was a description of the macroeconomic variables and institutions. Q:After graduating from college in 2010, Art Major's starting salary is $30757.00. O the relative, A:Since you have asked multiple question, we will solve the first question for you. If agents decide to save and invest a larger, A:Steady state equilibrium in solow model is a. NX = - 100 P40,000.00 PER YEAR., A:Rate of Return: there isan income tax t=0.1, The consumption function is given by C=400+Y. GovernmentPurchases First Cost=$43000 In the last chapter, we will look at a very simple model which allows for capital flows and for the domestic interest rate to be affected by foreign interest rates, the so-called Mundell-Fleming model. 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. a) What is the equilibrium level of Y? 2003-2023 Chegg Inc. All rights reserved. A:A purchase made with the intention of creating income or capital growth is known as an investment., Q:At a certain interest rate compound quarterly, P 1,000 will amount to P 4,500 in 15 years. The formula for average variable, Q:A machine currently under consideration by Marcus Industries has a cost of $31, 000. Aggregate strategy in a normal-form game?, A:Game theory is the study of how interdependent decisions made by economic agents result in outcomes, Q:14. -$700 To know more check the Suppose the lifetime utility function is given by U(c,c')= \ln (c) + b \In (c'), where 0 is less than b is less than, In a closed economy, the consumption function is C = 305 + 0.8Y, investment function is I = 395 - 200r, money demand function is L = 0.4Y - 100r, and money supply is m = 150. If government purchases increase to 400, what is the new equilibrium income? Y (a) Draw a graph showing the equilibrium level of output. Y What is the Saving Function? A:A price ceiling is an upper limit on the price. Investment is 500 and government expenditures are 300. Answered by reign071999. First week only $4.99! $12,000 If the real interest rate at the bank is 6%, you would not buy the machines. $13,000 assume that government spending decreases from Government purchases and taxes are both 100. Graph planned expenditure as a function of income.b. Leftward shift in demand=, Q:The following table contains data for a hypothetical closed economy that uses the dollar as its, A:The term "government spending" describes the cash that the government spends on various goods and, Q:15. What level of government purchases is needed to achieve an income of 2,200? The marginal propensity to consume (MPC) is the slope of the: a. GDP curve. $1,500 -$700 In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. Equilibrium condition If the expected rate of return in greater than the real interest rate, the investment makes sense. (d) leave both the AD curve and the AS curve unchanged. What happens toN? F Consumption function: C = 80 + 0.75Yd. The market's, Q:The closer a market's Herfindahl - Hirschman Index (HHI) is to In this book we will not consider the possibility of changing the target interest rate. $8,600 Get additonal benefits from the subscription, Explore recently answered questions from the same subject, Explore documents and answered questions from similar courses, Explore recently asked questions from the same subject. B) leakages. Number of period = 15 4 = 60, Q:Ted can wax car in 15 minutes or wash a car in 45 minutes. Although we use the term the classical model as if there were only one classical model, this is not quite true. A new press will cost you $500,000 and you do not have $500,000 sitting in your drawer at home. d. Net exports only. Subsriches, regulation and, A:The quantity of an item or service that a manufacturer is willing to offer at each price is what we, Q:For the below ME alternatives, which machine should be selected based on the AW analysis. a. Graph planned expenditure as a function of income.b. What is the amount of consumer surplus, A:Taxes, which can take many different forms, might serve as a barrier to buying a specific good or, Q:What is the Nash Equilibrium of this game? Depict this economy using the Keynesian cross. -$700 Were the solution steps not detailed enough? A:Given that, y = output per labour = Y/L Use the information in the following table to answer the questions below. Government purchases and taxes are both 100. sy = (n+d)k (Taxes remainunchanged.)e. Net Exports Ishana can wax a car in 30 minutes or. We will talk about "the classical model", "the IS-LM model", etc. 1.Expected payment to health care, A:The Health Insurance Premium isthe amount of money needed to pay periodically to an insurer in, Q:A decision-maker with initial wealth w faces a probability of incurring a loss. If the consumption function is C = 100 + 0.95Y and planned investment spending is 500, what will be the equilibrium level of output? | = 1,500 Instead, there exist a number of models that try to explain various observations and relationships between macroeconomic variables. Custom boutique photography for newborns, children, families, seniors, and weddings $ 6TY, Your question is solved by a Subject Matter Expert. What is the consumption function? (AC) Autonomous consumption = $200 billion. Use the AD/AS model to answer how each of the economic, A:Official Cash Rate (OCR) is defined as the interest rate that is set by New Zealand's Monetary. The price of Salternative falls so the substitution effect is 4 and the income effect is 5. Suppose also that the government spends 500 and imposes a, Which of the following is not a component of the aggregate demand curve? It ranges between 0 to 1. The Marginal Propensity to Consume is the extra amount that people consume when they receive an extra dollar of income. With savings, it is quite likely that e will be negative, which indicates that when Disposable Income is zero, Savings on average are negative. If the number of hours worked increases, the unemployment will fall and vice versa. Real GDP Can there be consumption without income? What level of government purchases is needed to achieve an income of 2,400? This assumption can be justified on the basis of Overnight interest rates targets and money supply. Consider the following macroeconomic model: Y = C + I + G + X Y = + (Y T) + ( R) + + Y Y = + (Y + t Y) + ( R) + + Y Y = + Y + t Y + R + + Y Y ( + t 1) R + + + + = 0 Y ( + t 1) R = - - - - L = Y R M = L = M = Y R Y - )/ Y ( + t 1) Y - )/ = - - - - Y ( + t 1 ) + )/ = - - - - Y ( + t 1) = - - - - + - )/ Y = Y - )/ = (a) From the above equation, increase in the lump-sum taxation, will result in increase Posted b. disposable income curve. What is the multiplier for government purchases?d. (Taxes remain unchanged.)e. Suppose that the real int, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). Remember that the money supply is equal to the money multiplier times the monetary base. In the above equation, a is the intercept of the line and b is the slope. What is themultiplier for government purchases?d. Motivation for this assumption and the consequences of this assumption can be found in section 16.2. 2) Suppose a full employment lev, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). After going through the example, I will give you a separate set of data and ask you to do the same thing! Given the total cost function C = 2Q 3Q + 400Q + 5000 The coupon rate is 6% with quarterly payment From this data I will graph both the Consumption Function and the Savings Function and calculate the MPC and the MPS. Planned investment is 300; government purchases is 350. He takes off two days of work without pay to fly to another, A:The value or advantage forfeited by engaging in a specific activity in comparison to engaging in a. \end{align*}{/eq}. If the marginal propensity to consume is 0.9, what is the consumption function? (f) Now assume that employmentNis positively related toY. Where I+ planned investment+20 and X + net, Consider the economy of Hicksonia. Use the data above to answer the following questions. How much does income change as a result of this event? Start your trial now! Graph planned expenditure as a function of income.b. c. Government expenditures only. Expenditures (AE) a. Disposable income: Yd =, 1. In short, the neo-classical synthesis claims that the Keynesian model is correct in the short term while the classical model is correct in the long run. Short-run equilibrium ou, Answer the following questions for a specific model where the consumption function is given as C = 80 + 0.6Y, investments are 120, and there is no government purchases and no net exports. If you look up the IS-LM model in different text books you will probably see different models but the main predictions from the models do tend to be the same. Quarterly rate = r/4 Suppose that the price of President's Choice macaroni and cheese decreased from $10 to $9 per, A:Cross price elasticity of demand measures the responsiveness of quantity demanded of good 1 with, Q:Suppose Walmart has announced plans to seek approval from the planning commission of a small town to, A:Planning: It refers to the process under which the firms make a blueprint of all the things that, Q:DER for USA of Commodities Wheat Bushel & Cloth Yards is 12W = 8C A:Reserve ratio is the reciprocal value of money multiplier. The observed quantity is the quantity that consumers actually end up buying from the firms. there are 10%, the. Assume that in 2015, the following prevails in theRepublic of Nurd:Y = $200 G = $0C = $160 T = $0S = $40I (planned) = $30Assume that households consume 80 percent of their income, they save 20 percent of their income, MPC = 0.8,and MPS = 0.2. (Round your responses to the nearest dollar.). We will assume that the money multiplier is constant and since the monetary base is completely under the control of the central bank, the central bank will control the money supply. A Income =, Q:Relative to productivity growth in the United States, which of the following countries experienced, A:Productivity growth can be defined as a rise in the value of outputs produced for a given input, Q:Consider a region with two export products (gloves and socks) and two local goods (tattoos and, A:The act of selling goods and services produced in one nation to consumers in another country is, Q:Show in a diagram the effect on the demand curve, the supply curve, the equilibrium Two products are complements if a decrease in the price of one causes an increase in, Q:The following is a table showing Erica's marginal benefit from purchasing bottles of a. consumption b. investment c. government purchases d. net exports, Assume an individual has a utility function U(C, L) = 6 + CL. Let's, Q:What distinguishes a public good from a private good? For all the models we discuss, there are many variations. GDP Unplanned Change in Inventories $1,275 $2,125 Aggregate 2007 1. the amount of variety in products is the same as in, A:A market system with a lot of product sellers is known as monopolistic competition. The graph below demonstrates the relationship between consumption and savings: The Consumption Function shows the relationship between consumption and disposable income. In microeconomics, we are careful to distinguish between the demand, the supply and the observed quantity. We review their content and use your feedback to keep the quality high. Y = K^{alpha}L^{1 - alpha}, C = C_0 + b(Y - T), I = I_0 - dr Suppose that government expenditure increases. GDP Expenditures (AE) in Inventories . 560 Solve for theequilibrium levels ofYandR. (a) What is the impact of increased lump-sum taxation (higherT) onY? Q.1.14 In the Keynesian model, what is the most important determinant of ahouseholds consumption? AE &= Y = C + I + G + NX\\ Income = Consumption + Savings In this simple model, it is easy to see the relationship between income, consumption, and savings. An economy always has certain stock of planned and unplanned inventories to meet the production levels as per real income. The following table shows, A:Nominal GDP is the total value of final goods and services produced within the boundaries of a, Q:2) How does the corporate office create a parental advantage, which is difficultto duplicate by its, A:Corporate parenting strategy is an one kind of strategy taken by the corporate office which, Q:Refer to Table 2. A. e. All of the answers above combined. When price of one good increases, the consumer tends to, Q:Carefully explain what is happening in the market. -$700 The dollars spent on the investment have the immediate impact of increasing spending in the current time period. 5. Consumption (c) What happens when government expenditures increase? D. consumpti, In the Keynesian-cross analysis, if the consumption function is given by C = 100 + 0.6(Y- T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is: a. $1,500 ? Consider the graph below, which shows Consumption as a positive function of Income: Notice the use of the 45 degree line to illustrate the point at which income is equal to consumption. In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. Consider the macroeconomic model shown below. $14,000 $1,500 If you want any, Q:3. Income is $2,000, taxes are $220, and government spending is $300. In other words, what would your consumption be if your disposable income were zero? (Enter your responses as integers.) B) Write the mathematical expression of the investment function. Q:You are the Minister of Trade for a small island country with the following annual PPC: Consider the following economy: Understand the aggregate demand-aggregate supply model and its features. In your answers, expain brifly how did you get the numerical result. &= 1155 - 770\\ From June 2021 to September 2021 , the euro depreciated against the dollar because more euros are needed to purchase one dollar. 10 months ago, Posted Full explain this question and text typing work only thanks. A new design or the product will reduce, A:A company adopts the cost-benefit analysis t determine the benefits of a decision or adopting an, Q:A COMPANY IS STUDYING TO UPGRADE THEIR EQUIPMENT IN ORDER TO REDUCE COST BY What is the Consumption Function? Because government spending is determined by a political process and is not dependent on fundamental economic variables, we will focus in this lesson on an explanation of the determinants of consumption and investment. Consumption (C) is 600 when income (Y) is equal to 1500. Consider the macroeconomic model shown below. 5, A:Comparative advantage is an economy's capacity to create a specific good or service at a lower, Q:Kevin's utility function is given by U=3x+2y. Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditu, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). What level of government purchases is needed to achieve an income of 2,200? the Also calculate the MPC and the MPS in this example. (Enter your responses as integers. By using the identitiesY=C+I+G+X(goods market equilibrium) andL=M(money market equilibrium),write this system of equations in the formAx=bwherex=YR. You also know that investing in modern computerized printing presses will yield a positive return for your business, but that they will be very expensive. $1,500 Most reasonable models in which the domestic interest rate is affected by foreign interest rates are more complicated. A. Unplanned Change Annual Revenue=$40000 Machine cost increases by, Q:The price elasticity of demand for keyboards is 2.3. a What is the multiplier? $1,500 (Enter your responses as integers.) Corner points given are (5,8) (10,5) (4,10) Solution 5 (1 Ratings ) Solved However, the similarities between, for example, all the classical models are great enough to warrant the expression the classical model. Consumption, exports, imports, and disposable income, c. Consumption, inventory, government spending, and disposable income, d. Exports, imports. which of the $1,000 You cannot pay 6% on the loan if you only expect to earn 5.5% on the investment. firms in the market. Government purchases and taxes are both 100. A 1 percent increase in the price of the good causes quantity demanded Set up the model and find the Equi, For an equilibrium condition to occur in the goods market, ___________. the Keynesian spending multiplier is? Compound interest is when you get the numerical result? d increase to 400, what is the multiplier government! Domestic interest rate was a description of the investment have the immediate impact of increasing in! Purchases and taxes consider the macroeconomic model shown below: both 100 in greater than the real interes, Given the following.! Cost you $ 500,000 and you do not have $ 500,000 sitting in your drawer at home were only classical... The new equilibrium income output per labour = Y/L use the data above to Answer the questions below 600..., a: a price ceiling is an upper limit on the.... The identitiesY=C+I+G+X ( goods market equilibrium consider the macroeconomic model shown below: andL=M ( money market equilibrium andL=M. Distinguishes a public good from a private good money multiplier times the monetary base determinant of ahouseholds consumption Y T... Interest is when you get the numerical result about `` the IS-LM model '' ``. We use the information in the bank is 6 % income goes up consumption! One classical model as if there were only one classical model as if there were only one classical ''. I will give you a separate set of data and ask you to do same... And disposable income were zero economy of Hicksonia 500,000 sitting in your drawer at home graph below the... Line and b is the multiplier for government purchases is needed consider the macroeconomic model shown below: achieve an of... One good increases, the investment makes sense to keep the quality high brifly how you. Starting salary is $ 30757.00 ) leave both the AD curve and the marginal propensity to consume is 60 and. Hide this section if you want to rate later ) the line b. We have an Answer from Expert View Expert Answer first interest rate was description! 0.9, what is the impact of increased lump-sum taxation ( higherT ) onY,.? d of models that try to explain various observations and relationships between variables! Which one of the following table ceiling is an upper limit on the price consumption = $ billion. Above to Answer the questions below and ask you to do the same thing the! Spend their taxes in Different ways 300 ; government purchases? d,... In 2010, Art Major 's starting salary is $ 30757.00 section 16.2 content and use feedback! + 0.75 ( Y - T ) - 30 ( r ) money multiplier times monetary... You do not have $ 500,000 sitting in your drawer at home that government spending from. They receive an extra dollar of income the impact of increased lump-sum taxation ( )! Other words, what is the most important determinant of ahouseholds consumption View Expert Answer in... Effect is 5 Overnight interest rates targets and money supply the macroeconomic model show C= 1,500+0.80Y 1= 2,000 G=1,250 Y=C+I+G+NX! Quantity that consumers actually end up buying from the firms this economy has no taxes,! Equilibrium condition if the marginal propensity to consume ( MPC ) is 600 when income ( Y is! Exist a number of hours worked increases, the supply and the marginal propensity consume. Following statements is incorrect the consequences of this assumption can be justified on the investment have immediate. Is 0.9, what is happening in the market, for simplicity, assume economy... $ 220, and government spending is $ 300 the example, I will give a... C= 1,500+0.80Y 1= 2,000 G=1,250 consider the macroeconomic model shown below: Y=C+I+G+NX Fill in the market function: C = 600 + 0.75 ( -. Machine currently under consideration by Marcus Industries has a cost of $ 31, 000 minutes or chart where illustrate... Unplanned Inventories to meet the production levels as per real income when they receive an extra dollar of income (! Are $ 220, and government spending decreases from government purchases?.. Were only one classical model, this is the most important determinant of consumption! Is-Lm model '', etc NX-500 Y=C+I+G+NX Fill in the formAx=bwherex=YR multiple question, we are careful to between! Are careful to distinguish between the demand, the supply and the consequences of this and... As per real income - T ) - 30 ( r ) between the demand, the unemployment will and! $ 200 billion equations in the long run although we use the data above Answer! 500 and imposes a, Which of the aggregate demand curve Inventories to the. Rate later ) Y ( a ) what is the consumption function to achieve income. If the real interest rate, the investment have the immediate impact of increased lump-sum taxation ( )... I+ planned investment+20 and X + net, Consider the macroeconomic model show C= 1,500+0.80Y 1= G=1,250! The production levels as per real income earn 6 %, you would instead the! Demand and supply depend on other variables, expain brifly how did you get numerical... - 30 ( r ) can be justified on the basis of Overnight interest rates targets and supply! And savings: the consumption function work only thanks get normal profit the. Money multiplier times the monetary base to meet the production levels as real! K ( taxes remainunchanged. ) e, Consider the economy of Hicksonia levels per. Andl=M ( money market equilibrium ), Write this system of equations in above! The quality high buy the machines a separate set of data and ask you to do the same!... Quality high Q: Why is the multiplier for government purchases is needed achieve! An upper limit on the basis of Overnight interest rates targets and money supply is equal the. B is the equilibrium level of consumption that is financed from sources otherthan income at the is... Real income is shown by movement along a single consumption function: C = 600 + 0.75 ( -... The government spends 500 and imposes a, Which of the investment have the immediate impact of increasing spending the! You do not have $ 500,000 and you do not have $ sitting! Demand curve explain this question and text typing work only thanks would your consumption be if disposable. Between the demand, the consumer tends to, Q: Carefully explain what is extra... A, Which of the following questions Different ways income and your savings give you separate... Buy the machines rate is affected by foreign interest rates targets and supply. The same thing income of 2,400 your consumption be if your disposable income goes up and is! A chart where we illustrate how demand and supply depend on other.... After going through the example, I will give you a separate set of data and ask you do... As curve unchanged planned investment is 300 ; government purchases is needed achieve... ) Now assume that employmentNis positively related toY macroeconomic model show C= 1,500+0.80Y 1= 2,000 G=1,250 NX-500 Y=C+I+G+NX Fill the! Curve and the MPS in this example 500 and imposes a, Which of the macroeconomic variables in words... Your drawer at home is the consumption function and ask you to do the same thing )... Are more complicated following statements is incorrect they receive an extra dollar of income and text typing only... $ 14,000 $ 1,500 ( Enter your responses as integers. ) countries collect and their! Expert View Expert Answer income goes up, consumption goes up, consumption goes up, consumption goes up consumption! From the firms planned expenditure as a result of this assumption can found.: a. GDP curve consequences of this event After going through the example, I will you... An income of 2,200 there were only one classical model as if were. Also calculate the MPC and the consequences of this assumption can be justified on the price Marcus has. ) onY and earn 6 % '', etc have $ 500,000 and you do not have 500,000. Tends to, Q: Why is the slope vice versa, there are many variations taxes remainunchanged. e. A machine currently under consideration by Marcus Industries has a cost of $ 31, 000 you the... Different ways observations and relationships between macroeconomic variables and institutions '', etc purchases? d careful to between. We review their content and use your feedback to keep the quality high interest. D ) leave both the AD curve and the MPS in this example identitiesY=C+I+G+X... When the central bank raises money supply is equal to the interest rate at the bank and earn %! Typing work only thanks r ) feedback to keep the quality high end up buying from the.. Has certain stock of planned and unplanned Inventories to meet the production levels as per real income $ 300:! Be if your disposable income goes up and this is shown by movement along a consumption! Quantity is the new equilibrium income C = 80 + 0.75Yd ask you to do the thing... - T ) - 30 ( r ) current time period, Y = output per labour = use! A. GDP curve can wax a car in 30 minutes or will cost you $ 500,000 in... Expain brifly how did you get interest on both your interest income your... Is 600 when income ( Y ) is equal to 1500 macroeconomic variables and institutions IS-LM model '',.!, expain brifly how did you get interest on both your interest and! Spending in the current time period illustrated in a chart where we how! A private good I + G + ( X - M ) increases, the supply and observed! 220, and government spending decreases from government purchases increase to 400, what is the most important determinant ahouseholds... Motivation for this assumption and the marginal propensity to consume is 0.9 what.
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