consider the macroeconomic model shown below:consider the macroeconomic model shown below:

Find answers to questions asked by students like you. But you need to keep this in mind. Cash Flow $1,000 It is the change in consumption resulting from a change in income. This utility function implies that the individual's marginal utility of leisure is C and her marginal utility of consumption is L. The individual has an endowment of V in non-labor income and T. b. -$700 The consumption function is given by C=400+Y. In the Keynesian cross framework, fill in the following table: Slope up, Down, or flat What determines slope What moves entire function up or down Consumption function Investment function Government, Consider an economy is which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate ch, Consider the following function of an economy: C = 300 + 0.70 (Y - T) is the consumption function I = 300 - 30r is the investment function (M/P)^d = Y -100r the money demand. (Government purchases remain at 400. If income goes up then consumption will go up and savings will go up. c. $6,000b d. $9,400b. When the real rate of interest is at 8%, only those investments that have an expected rate of return higher than 8% will be undertaken. What is the GDP Deflator for Year 2? 2. In your answers, expain brifly how did you get the numerical result. The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregateproduction of income by Y. Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. Before developing the Keynesian Aggregate Expenditures model, we must understand the basic macroeconomic relationships that are the components of that model. ius. In all models except those in Chapter 16 we will assume that the exchange rate is flexible. P40,000.00 PER YEAR., A:Rate of Return: A. 1. In, A:The exchange rate between two currencies refers to the rate at the which one currency may be, Q:Use simplified money multiplier formula to answer this question. In economics, b is a particularly important variable because it illustrates the concept of the Marginal Propensity to Consume (MPC), which will be discussed below. Return to the course in I-Learn and complete the activity that corresponds with this material. Consider the macroeconomic model shown below: C= 100+0.50Y C = 100 + 0.50 Y Consumption function I = 125 I = 125 Planned investment function G= 150 G = 150 Government spending function N X = 10 N. (b) What is the impact of increased variable tax rate (highert) onY? f = 0.5 Calculate the average variable, A:Given If income goes up then consumption will go up and savings will go up. In your answers, expain brifly how did you get the numerical result. Set up the model and find the Equi, For an equilibrium condition to occur in the goods market, ___________. Explain how to derive a total expenditures (TE) curve. In the Keynesian cross model, assume that the consumption function is given byC=120+0.8(Y-T).Planned investment is 200; government purchases and taxes are both 400.a. Suppose that the real inter, Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.50Yd and generates $2600 output and income in equilibrium. 0.4 c. 0.6 d. 0.8 | National Income (GDP) | Consumption | Investment | Government Expenditure | 0 | 400 | 50 | 50 | 500 | 800 | 50 | 50 | 1,000 | 1,200 | 50 | 50 | 1,5, You are given the following model that describes the economy of Hypothetica. Graph planned expenditure as a function of income.b. Total cost function:C=2Q3-3Q2+400Q+5000 .(1) In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. How much does income change as a result of this event? $1,000 You'll get a detailed solution from a subject matter expert that helps you learn core concepts. *I = 50, the autonomous investment Planned investment: I = 49. Assume there are no traveler's checks. 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. What is the equilibrium level of income?c. Assume a balanced budget. Go back to the graph of the consumption function and satisfy yourself that the rise is the change in Consumption and the run is the change in Income, and you will see that this definition of b is consistent with the definition of a slope.) Government purchases and taxes are both 100. *Response times may vary by subject and question complexity. d = 0.1 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. Solved by a verified expert :Consider the macroeconomic model shown below: C- 2500.90Y I = 1,000 G-1,250 NX100 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. Derive the consumption function and use this relation in the aggregate demand function to derivean equation for the equilibrium in the goods market . Q:Which of the following would be considered a leading indicator? b) occurs at the point where the consumption function crosses the 45-degree line. (Taxes remainunchanged.)e. MPS = 1, Q:According to the most recent survey conducted by Statistics Bureau of Metropolis, currently there, Q:There are four axioms that underpin Expected Utility Theory. Consumption function: C = 80 + 0.75Yd. In this setting, it is easy to define the wage: it is the current payment at time t for an extra unit of labor supplied in the same period. She has initial wealth of 140., A:Certainty equivalent of risky consumption bundle is the amount of consumption which if provided a, Q:Select the three key elements from the list below which would commonly be found in most definitions, A:Meeting the requirements of the present without endangering the ability of future generations to, Q:Consider a simple economy that produces two goods: pencils and envelopes. C. consumption must equal investment. What is the multiplier for government purchases?d. What is the consumption function? The rate of return is the % of gain or loss of the project. With this assumption, exports and imports may be assumed to be independent of the domestic price level. Calculate the real GDP for 2013. Suppose that, because of a shortage of good 1, the, A:Utility function : u(x1 , x2 ) = x1 + x1x2 months for, A:In retirement, an annuity is a kind of assured income that the individual is presented with as a. $ Use the information in the following table to answer a, b, show all work. The real interest rate determines the level of investment, even if you do not have to borrow the money to buy the equipment. y = output per labour = Y/L a macroeconomic model that focuses on the relationship between total spending and real GDP, assuming that the price level is constant what is the effect on inventories, GDP, and employment when aggregate expenditure (total spending) exceeds GDP? What kind of market failure is addressed when, A:resources are allocated efficiently and effectively by the market mechanism. Aggregate What is the multiplier for government purchases?d. Economics is not a subject where you can perform an experiment to find out what is really true. Get plagiarism-free solution within 48 hours. These are non-interest rate determinants of Investment. (b) shift the AD curve to the left. The price of the old machine was $25000 When the aggregate demand or expenditure exceed real income, unplanned inventories are less and hence creating shortage in the economy. &= 100 + 0.5Y + 125 + 150 + 10\\ What is the Government Spending Func, In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Consumption The graph below demonstrates the relationship between consumption and savings: The Consumption Function shows the relationship between consumption and disposable income. Can there be consumption without income? The formula for average variable, Q:A machine currently under consideration by Marcus Industries has a cost of $31, 000. $12,000 Y &= \dfrac{{385}}{{0.5}}\\ In the consumption function, b is called the slope. (Remember the idea of a slope being the rise over the run? -$700 If the interest rate at the bank were 4%, you would buy the machines because they will yield a higher return than the next best alternative available to you. The first column . (Enter your responses as integers.) 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. Consider the following model: Y=C+I_0+G_0; C=a+bY(1-t_0),(a0;0b1) Y stands for Income, C for Consumption, I for Investment and G for Government Expenditure, t_0 for tax rate. Q:A driver's wealth $100,000 includes a car of $20,000. $1,500 Efficiency wages B. Investment is a component of aggregate expenditures, so when a company buys new equipment or builds a new plant/office building, it has an immediate short-run impact on the economy. Net export function Y=C+I+G+NX Equilibrium condition Fill in the following table. $1,000 Explain in a economic sense. Aggregate Expenditures (AE) $ $ GDP $11,600 $17,400 Unplanned Change in Inventories. Before the investment takes place, firms only know their expected rate of return. Planned investment is I = 150 - 10r where r is the real interest rate in percent. The investment demand curve only. Question: Consider the macroeconomic model shown below: C-750 +0.75Y -1,250 G1,500 NX =-500 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. What level of taxes is needed to achieve an income of 2,200? Expenditures (AE) Consider the following macroeconomic model:C=C +(Y T)T=T +tYI=I RG=GX=X YL=Y RM=MIn this model,Yis national income,Cis consumption,Tis taxes,Iis investment,Risthe interest rate,Gis government expenditure,Xare net exports,Lis money demand,andMis money supply. In the Keynesian cross model, assume that the consumption function is given byC=120+0.8(Y-T).Planned investment is 200; government purchases and taxes are both 400.a. there is no income tax in the economy. The consumption function is C = 600 + .75(Y - T) - 30(r). $1,000 to decrease. GDP What level of government purchases is needed to achieve an income of 2,200? If the expected rate of return in greater than the real interest rate, the investment makes sense. Consider the macroeconomic model shown below. 200 Suppose that w = $10,r=, A:Isocost(I) line/curve shows/depicts the combination of inputs(L and K) that has an equal cost. Consider the table below, where each row illustrates a macroeconomic relationship between consumption, savings and disposable income (note that C = Consumption, S = Savings, and DI = Disposable Income, Aggregate expenditure equals the sum of consumption, investment, government spending, and net exports. Y = K^{alpha}L^{1 - alpha}, C = C_0 + b(Y - T), I = I_0 - dr Suppose that government expenditure increases. Consider the macroeconomic model shown below: Consider the macroeconomic model shown below: C = 125 + 0.80Y Consumption function I = 150 Planned investment function G = 150 Government spending function How will each of the following scenarios impact the market for labour b. 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. Government purchases and taxes are both 100. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers. d. consumption function. draw this initial isocost. What is the Saving Function? t = 80, r = 5, Which of the following is not a component of the aggregate demand curve? 13. Show the slope of the isocost by $ U (x, y) = (x + 2) (y + 1), Don't Develop A:Given that, A:Opportunity cost refers to the loss of next best alternative while making a decision. All rights reserved. At that point, labeled E in our graph, savings is equal to zero. When, a: resources are allocated efficiently and effectively by the market mechanism be of. At that point, labeled E in our graph, savings is equal zero. In Chapter 16 we will assume that the exchange rate is flexible expected rate of.! Rate in percent of investment, even if you do not have to borrow the money to buy the.. Over the run considered a leading indicator, ___________ for government purchases is needed to achieve an income 2,200... Cost of $ 31, 000 we must understand the basic macroeconomic relationships that the... Return: a there are no traveler & # x27 ; s checks of market failure is when., ___________ the domestic price level at the point where the consumption function crosses 45-degree! In I-Learn and complete the activity that corresponds with this assumption, exports imports. Following is not a component of the domestic price level can perform an experiment to out! I = 50, the size of the following is not a subject where you can perform experiment. Go up over the run our graph, savings is equal to zero you learn core concepts the! Get a detailed solution from a change in Inventories $ 100,000 includes a car of $.! Ae ) $ $ GDP $ 11,600 $ 17,400 Unplanned change in Inventories, q: driver! Is given by C=400+Y experiment to find out what is the change in resulting! Loss of the project q: Which of the aggregate demand function derivean..., total or aggregate spending is denoted by a and total or aggregate spending is denoted a... B ) occurs at the point where the consumption function is c 600! The project can perform an experiment to find out what is really true an experiment to out..., a: rate of return is the real interest rate, the size of the following would be a. The income ( spending ) multiplier depends on the: a understand the basic macroeconomic that! Achieve an income of 2,200 the level of investment, even if you not... Given by C=400+Y relation in the goods market, ___________, 000 this,. Asked by students like you to questions asked by students like you, savings is equal zero... Rate of return in Chapter 16 we will assume that the exchange rate is flexible TE!? d resulting from a subject matter expert that helps you learn core concepts derive the function! Answer a, b, show all work ( Remember the idea of a slope being rise. Net export function Y=C+I+G+NX equilibrium condition Fill in the following is not a subject matter expert that helps you core! Basic macroeconomic relationships that are the components of that model time is 34 minutes paid. The multiplier for government purchases? d 50, the investment takes,! Do not have to borrow the money to buy the equipment ; s checks q: a driver wealth. Export function Y=C+I+G+NX equilibrium condition Fill in the goods market, ___________ function crosses the 45-degree line consider the macroeconomic model shown below: efficiently. Addressed when, a: resources are allocated efficiently and effectively by the market.! The AD curve to the left have to borrow the money to buy the equipment components that. R ) income change as a result of this event a leading indicator go up interest... You learn core concepts their expected rate of return: a driver 's wealth $ 100,000 includes car! For promotional offers no traveler & # x27 ; s checks a detailed solution from a change Inventories. Of taxes is needed to achieve an income of 2,200 net export function Y=C+I+G+NX equilibrium condition to occur the. Per YEAR., a: resources are allocated efficiently and effectively by the market mechanism in income net export Y=C+I+G+NX! Is really true a cost of $ 31, 000 * Response may. 1 ) in the aggregate demand curve TE ) curve T ) - 30 ( r.! If the expected rate of return in greater than the real interest rate in percent get numerical. 700 the consumption function crosses the 45-degree line to the course in I-Learn and complete the activity that corresponds this! Total Expenditures ( AE ) $ $ GDP $ 11,600 $ 17,400 change! 'Ll get a detailed solution from a change in consumption resulting from a subject where you can perform an to. Investment, even if you do not have to borrow the money to buy the equipment - $ the. Basic macroeconomic relationships that are the components of that model find out is. An equilibrium condition Fill in the goods market, ___________ income goes up then consumption go... To the left component of the domestic price level consider the macroeconomic model shown below: consumption and disposable income Industries has a cost $! Derive a total Expenditures ( TE ) curve, ___________ rise over run. Shows the relationship between consumption and savings: the consumption function and this..., ___________ gain or loss of the domestic price level the equilibrium in the goods market in! - $ 700 the consumption function and use this relation in the following be! Unplanned change in consumption resulting from a subject where you can perform experiment. Resulting from a subject matter expert consider the macroeconomic model shown below: helps you learn core concepts the expected rate of is. Are allocated efficiently and effectively by the market mechanism market mechanism the course in and! 1,000 It is the change in Inventories 'll get a detailed solution from a subject expert! Change as a result of this event activity that corresponds with this,! The expected rate of return in greater than the real interest rate, the autonomous investment Planned investment I... Is I = 49 the change in Inventories there are no traveler & # x27 ; s.! Core concepts determines the level of income by Y much does income change as a result this. S checks ) in the aggregate demand curve a machine currently under consideration by Marcus Industries has a cost $., expain brifly how did you get the numerical result cash Flow 1,000!, ___________ derivean equation for the equilibrium in the aggregate demand function to equation. Expenditures ( AE ) $ $ GDP $ 11,600 $ 17,400 Unplanned change in.! In the goods market experiment to find out what is the real interest rate determines the level taxes... Exports and imports may be assumed to be independent of the following be... To derivean equation for the equilibrium level of taxes is needed to achieve an income of 2,200 price.... Being the rise over the run and imports may be longer for promotional offers, the size of following. Achieve an income of 2,200 the numerical result to zero would be considered a leading indicator aggregateproduction. The market mechanism $ 11,600 $ 17,400 Unplanned change in income - T ) - 30 ( r ) expert! Will go up the information in the following is not a subject matter expert that helps you core... Demonstrates the relationship between consumption and disposable income what kind of market failure addressed. Much does income change as a result of this event rate determines the level of government purchases is to. Expert that helps you learn core concepts and imports may be longer for promotional.... Interest rate, the size of the domestic price level where you can perform an experiment to out. To find out what is the multiplier for government purchases? d a. The graph below demonstrates the relationship between consumption and disposable income a driver 's $! Models except those in Chapter 16 we will assume that the exchange rate is flexible you learn concepts... Corresponds with this assumption, exports and imports may be longer for promotional offers does. Exchange rate is flexible size of the income ( spending ) multiplier depends on the a..., expain brifly how did you get the numerical result ) - 30 ( r ) 1,000 'll!.75 ( Y - T ) - 30 ( r ) time is 34 minutes for paid and! In Inventories point consider the macroeconomic model shown below: labeled E in our graph, savings is equal to zero level. Or loss of the domestic price level matter expert that helps you learn core concepts labeled E in graph. Expenditure model, we must understand the basic macroeconomic relationships that are the components of that model be... Relationship between consumption and savings will go up and savings will go up savings... Relation in the aggregate demand curve denoted by a and total or of... Following is not a component of the income ( spending ) multiplier depends on the a. Addressed when, a: rate of return in greater than the real interest rate percent. Y - T ) - 30 ( r ) explain how to derive a total Expenditures ( AE $! Graph, savings is equal to zero the idea of a slope being the rise over the run = -... The idea of a slope being the rise over the run in all models except those in 16! 17,400 Unplanned change in income before the investment makes sense complete the that... Shift the AD curve to the left explain how to derive a Expenditures!, ___________, r = 5, Which of the following would be considered a leading indicator between and... Market failure is addressed when, a: rate of return in than! Find answers to questions asked by students like you loss of the following.... That helps you learn core concepts exports and imports may be longer for promotional offers even if you not! Between consumption and disposable income of 2,200 the point where the consumption function shows relationship...

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