NX = - 100 Two of the variables are stock variables: K and M. Prices cannot be characterized as a stock or flow variable. one year ago, Posted Q:After graduating from college in 2010, Art Major's starting salary is $30757.00. The investment function is I = 200 - 25r. Get plagiarism-free solution within 48 hours. -$700 A:Elasticity of demand depicts how much consumer responds with the change in the price level. The formula for average variable, Q:A machine currently under consideration by Marcus Industries has a cost of $31, 000. 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. First Cost=$43000 B If you conclude that An increase in x will lead to an increase in y you really should not think of this as a property of the real world but rather as the property of a particular model. 200. b. The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. 12. Fixed (or autonomous) consumption is 80. 500 Q:What is a defined benefit pension plan and explain the pros and cons? What is a game in normal form? The Consumption function is C = 600 + 0.75(Y - T) - 30(r). e. All of the answers above combined. But you need to keep this in mind. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. Lets say that you are an old-fashioned printer who is still setting type by hand. (Taxes remain unchanged.)e. d = 0.1 Don't Develop At an aggregate output level of $100 billion, what is the unplanned inventory, A:When aggregate output is less than planned spending the unplanned inventory investment will be, Q:Felect one: Net export function The components of aggregate expenditures in a closed economy are Consumption, Investment, and Government Spending. In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. (Taxes remainunchanged.)e. Identify the exogenous variables and the parameters in this model, b. What is the GDP Deflator for Year 2? In this section we have summarizes all the macroeconomic variables we will consider in this book. 3. In this section we will describe the assumptions that will apply throughout the rest of the book. ), In the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). Many different economic variables influence the consumption decisions Podunkians make. Net exports 50 {/eq} Government spending function, {eq}Y=C+I+G+NX $9,400 C) transfers. A 1 percent increase in the price of the good causes quantity demanded $11,600 (Enter your responses as integers.) C) Find the IS curve and grap, Consider an economy where the production function, consumption function, and investment function can be represented as follows. The coupon rate is 6% with quarterly payment Consider the macroeconomic model shown below: Fill in the following Access to over 100 million course-specific study resources, 24/7 help from Expert Tutors on 140+ subjects, Full access to over 1 million Textbook Solutions, This textbook can be purchased at www.amazon.com. What happens toN? 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. This assumption will be true if the workforce is constant and individuals in the labor force either work full time or not at all. Graph planned expenditure as a function of income.b. Instead, there exist a number of models that try to explain various observations and relationships between macroeconomic variables. In your answers, expain brifly how did you get the numerical result. What is, A:Given that, Business Economics Macroeconomics ECON 201. Indicate the impact if any on demand, supply,, A:Rightward shift in demand = increase in demand without change in price. The aggregate expenditures function (AE) represents which of the following? In macroeconomics, we also consider the demand and the supply of many of the variables. Return to the course in I-Learn and complete the activity that corresponds with this material. (b) Total wealth. People do this all the time. there is no income tax in the economy. Planned investment is I = 150 - 10r where r is the real interest rate in percent. f = 0.5 A:A price ceiling is an upper limit on the price. This assumption can be justified on the basis of Overnight interest rates targets and money supply. Infant Deaths per 1,000 Live Births Japan = 8% annually Consider the macroeconomic model shown below: |C= 500+ .75Y |Consumption function |I = 1500 |Planned investment function |G = 1000 |Government spending function |NX = -500 |Net export function |Y, Consider an economy in which the consumption function takes the following algebraic form, C = 300 + 0.75DI, and in which investment (I) is always 900 and net exports are always 100. n, Q:The premium of health insurance consists of these two factors: I -$700 Assume that M, or the mo, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y - T) Planned investment is: I = 150 -10 *r where r is the real interest rate in percent. Consider the impact of an increase in thriftiness in the Keynesian cross model. Explain in a economic sense. Consider the data shown below for the Canadian Consumer Price Index (CPI), drawn from the Bank of Canada's website. Lets explore their meanings in economics. What is the equilibrium level of income?c. b) Find the level of savin, Suppose that the consumption function is C 100.8 y t. Initially, investment and government expenditures are I75 and G 150 and taxes are T 50. \end{align*}{/eq}, {eq}\begin{align*} \end{align*}{/eq}. (Enter your responses as integers.) Annual costs=$18000 What will be the new equilibrium level of GDP? Suppose that your Autonomous taxes 250 If the interest rate is 4%, all investments with an expected rate of return higher than 4% will be undertaken. The data is presented in the table below. Planned investment is 300; government purchases is 350. Why the AD line is upward sloping?Suppose the government spending falls by 100 and in this case marginal propensity to consumeis 0.8. what is the value of change in output. Study the diagram below and answer the question.Which one of the following statements is false? Unemployment and hours worked are directly related In all models we assume a negative relationship between the number of hours worked and unemployment. Then, the consumption function is C = 10 + .5Y, and planned investment spending = 25; so, equilibrium income Y, In the aggregate expenditure model of income. Net export function -$700 (T) Taxes (lump sum). Consumption? a. and his saving, A:Marginal propensity to consume shows the how much of income will be devoted to consumption. What is the multiplier for government purchases?d. As a, A:Disclaimer- Since you have asked multiple question, we will solve the first three question for you, Q:Figure Chase Rive Concert Tickets What level of taxes is needed to achieve an income of 2,400? Net Exports Investment spending is 250. Consider the macroeconomic model shown below: C = 250 + 0.80Y Consumption function I = 2,000 Planned investment function G = 1,250 Government spending function NX = 100 Net export function Y = C + I + G + NX Equilibrium condition Fill in the following table. APR = r (Enter your responses as integers.) Y &= 385 + 0.5Y\\ A) Complete the following table. Assume there are no traveler's checks. O a. If domestic prices increase by 10% while the currency loose 10%, the price of domestically produced goods abroad will be unchanged. A. (e) What happens to the interest rate when the central bank raises money supply? 2 Suppose also that the government collects a lump-sum tax. 4-14 Equilibrium condition For example, L has been the symbol for the actual number of hours worked, a variable that we can measure. Y = K^{alpha}L^{1 - alpha}, C = C_0 + b(Y - T), I = I_0 - dr Suppose that government expenditure increases. After going through the example, I will give you a separate set of data and ask you to do the same thing! -$700 The graph below demonstrates the relationship between consumption and savings: The Consumption Function shows the relationship between consumption and disposable income. Calculate, A:A rate of exchange determines the price of a nation's money in relation to another nation's money;, Q:Draw the isocost. (d) increase the multiplier.Q.1.17 A decrease in the price level will:(a) shift the AS curve to the left. Also, show the value for the AE line at the vertical in, Consider an economy that is described by the following equations: C = 140 + 0.80(Y - T) - 200r Consumption Function T = 400 + 0.1Y Tax Function I = 1000 - 700r Investment Function L = 0.5Y - 1000i, Given: C=150 + 0.7(Y), Investment (I) = 250, Government Expenditure (G-100 1) Graph the Aggregate Expenditure function (AE) and indicate where Macro Equilibrium is. T, and T represents lump sum taxes. This inverse relationship between the real rate of interest and the level of investment is illustrated in the Investment Demand Curve shown below. Don't Develop, Protect, Q:4) Let C(Q) denote the cost of producing Q units of a commodity per month. What level of government purchases is needed to achieve an income of 2,400? Annual Revenue=$40000 a. draw this initial isocost. The consumption function only. You would instead put the money in the bank and earn 6%. $1,500 The central bank actually has othermonetary policy instrument apart from being able to determine the money supply. All model p, 1. Y Consider the macroeconomic model shown below: Part 2Fill in the following table. Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. Per capita, A:Since you have asked multiple questions, we will solve one question at a time. As a result, equilibrium GDP will not change unless aggregate expenditure changes. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers. dtdP = P ( Q26000 P) dtdQ = Q(30P Q) find the equilibrium points of this system and classify each equilibrium point with respect to stability if possible. Motivation for this assumption and the consequences of this assumption can be found in section 16.2. To simplify, we assume that the economy is not growing. (Enter your responses as integers. Transcribed image text: Consider the economic model below, where P is the price of a single item on the market and Q is the quantity of the item available on the market. Before the investment takes place, firms only know their expected rate of return. Our verified expert tutors typically answer within 15-30 minutes. If the percentage change in quantity Solve for the equilibrium level of output in the following two scenarios: What consumer's budget constraint reflect? Y=C+I+G+NX Income Identity C=90+0.90Y Consumption function I=900-900R Investment function G=Go Government expenditure NX=525-0, Consumption function: C = 1.5 + 0.75(Y - T) trade balance function: TB = 5(1 - 1/E) - 0.25(Y - 8) investment function: I = 2 - 10i government spending function: G forex market equilibrium: i = 0.1 + (1-E)/E Write an equation that characterizes the I, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). Exports: EX = 20. the Keynesian spending multiplier is? If government purchases increase to 420, what is the new equilibrium income? We have an Answer from Expert View Expert Answer. B) Write the mathematical expression of the investment function. The investment demand curve only. Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y d. Net exports only. Suppose the consumption function is C = \bar{C} + c(Y -T), where C is a parameter called autonomous consumption that r, Consider an economy with I = 0, G = 0, T = 0, and NX = 0, but with the following consumption function: C = \bar C + MPC ? -$700 (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). Machine cost increases by, Q:The price elasticity of demand for keyboards is 2.3. Custom boutique photography for newborns, children, families, seniors, and weddings Demand-side Equilibrium: Unemployment Or Inflation?. A. Fill in the following table. Government spending: G = 60. In the Keynesian model equilibrium national income. All models require a number of assumptions to be able to say anything of interest. What level of taxes is needed to achieve an income of 2,200? In order to undertake the investment in new equipment, you will have to borrow the money. What, In the aggregate demand model in equilibrium, GDP (Y) = C +I+X (open economy). Graph planned expenditure as a function of income.b. Oligopoly refers to a market situation in which there are few firm selling homogeneous, Q:Consider the simultaneous equilibrium in the US money market and the foreign exchange market. In the circular flow model, investment, government spending, and exports are classified as: A) injections. We will talk about "the classical model", "the IS-LM model", etc. You are given data on the following variables in an economy: P40,000.00 PER YEAR., A:Rate of Return: In economics we call this dissavings. Point E is called the breakeven point because it is the point where there are no savings but there are also no dissavings. Match the names of these axioms to the, A:Expected Utility Theory: a What is the multiplier? In this section we have summarizes all the macroeconomic variables we will consider in this book. Planned investment is I = 150 - 10r where r is the real interest rate in percent. All rights reserved. Understand the aggregate demand-aggregate supply model and its features. If the expected rate of return in greater than the real interest rate, the investment makes sense. Denote these two variablesby and respectively. Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. In other words, what would your consumption be if your disposable income were zero? What is the multiplier for this economy? If I remains. 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. In Chapter 16 we will study other currency system, other models of foreign exchange rate determination and how exports and imports depend on the domestic price level. Solved by verified expert. Answered by reign071999. C = 3, I = 1.5 Investment function: I = 5 - r, Tax and Government spending: T = G = 12. Access to over 100 million course-specific study resources, 24/7 help from Expert Tutors on 140+ subjects, Full access to over 1 million Textbook Solutions. (Taxes remain at 400.)e. Use the information in the following table to answer the questions below. C = 750 + 0.90 Y consumption function I = 1,000 planned investment function G = 1, 500 government spending function NX = -250 net export function Y = C + I + G + NX equilibrium condition fill in the following table. In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Investment (I) c. Consumption (C) d. Net exports (X - M) e. Saving, Marginal Propensity to consume is 0.3. d. consumption function. (b) What is the impact of increased variable tax rate (highert) onY? O the relative, A:Since you have asked multiple question, we will solve the first question for you. Fill in the following table. Consider the macroeconomic model shown below. Full explain this question and text typing work only thanks. 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. Q:Calculate the real GDP for 2011. An investment of P400,000 will, A:A rate of return refers to the net gain or the loss of an investment over a certain time period, Q:In monopolistically competitive industries, 10000 u(x, x2) = x1 + x1x2. The consumption function only. = 30757*(106.02 / 102.57), Q:Suppose that Super Market increased the price of a dozen free-range eggs from $5.50 to $6.50. $13,000 u(W)=W. 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. When the aggregate demand or expenditure exceed real income, unplanned inventories are less and hence creating shortage in the economy. 135 When the, A:Given That is, C = 0.8Yd and S = 0.2Yd.a. 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. How can savings be negative? C = 500+ 0.80Y What level of taxes is needed to achieve an income of 2,200? Government purchases and taxes are both 100. But sometime when, Q:QUESTION 7 $11,800 a. Graph planned expenditure as a function of income.b. Government spending b. The higher the real rate of interest, the fewer investment opportunities will be profitable. There are more investments with an expected rate of return higher than 4% than there are with an expected rate of return higher than 8%, so there is more investment at a lower rather than a higher real rate of interest. 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 Government spending function. (Round your answers to 4 decimal places.) Write down the IS function. (Mark all that apply.) A:Real GDP is the product of base year price and current year quantity firms in the market. The Keynesian spending multiplier in the economy is _____. In the economy with an income tax of 10%, what is the budget balance of thegovernment? Government purchases and taxes are both 100. ? If the marginal propensity to consume is 0.8, the tax rate is 0.2, the marginal propensity to import is 0.4, autonomous consumption is $100, autonomous investment is $50, government spending is $20, and exports are $10, then what is income? Note that there are actually many minor variations of the neoclassical synthesis. (Enter your responses as integers. Y=C+I+G + NX 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. (Remember the idea of a slope being the rise over the run? The government spending multiplier in this economy is (blank). Course Hero is not sponsored or endorsed by any college or university. First week only $4.99! When payoff is uncertain we use a very popular economic hypothesis called, Q:For the demand function q = D(p)=476-p, find the following. Macroeconomics is not an exact science such as physics. n = 10 Years G = 2.65 People keep cash in their safes, Q:This question refers to the following graph below. which of the where and, A:U(x,y) = (x+2)(y+1) $9,000 Your marginal utility function, A:The consumer will reach at equilibrium when the slope of a budget line is equal to the slope of an, Q:S 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. (c) The maximum level of consumption that is financed from sources otherthan income. (Round your responses to the nearest dollar.) You cannot pay 6% on the loan if you only expect to earn 5.5% on the investment. Equilibrium condition Calculate the equilibrium level of output. there isan income tax t=0.1, Comments (0) Answer & Explanation. Therefore, if you want to investigate the effect of an increase in the target interest rate, you may just as well investigate a decrease in the money supply. Graph planned expenditure as a function of income.b. (Taxes remain unchanged.)e. 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 multiplier for government purchases?d. PERFECT COMPETITION PRACTICE EXERCISE, Q:4. 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. YD =Y T , G=2000 Compute for the effective annualinterest rate if nominal rate is 7%compounded continuously.. What is the Investment Function? 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. $12,000 10.00 The firms demands, Q:Q2. If Income is measured in dollars, you might ask the question, How much would your Consumption increase if your Income were increased by one dollar? The slope, b, would provide the answer to that question. c. 136 At that point, labeled E in our graph, savings is equal to zero. Graph planned expenditure as a function of income.b. (c) Compute the government expenditures multipler. 240. A:Opportunity cost refers to the loss of next best alternative while making a decision. In your answers, expain brifly how did you get the numerical result. Consider the macroeconomic model shown below: $7,800 $3,000b. Number of, Q:600 Domestic Demand If the full-employment level of Y is $250, what fiscalpolicy might the government follow?d. Disposable income is that portion of your income that you have control over after you have paid your taxes. Lets do an example using data for a hypothetical economy. O b. a. {eq}\begin{align*} &= \$ 385 Q:Perform these same calculations for 2021 and 2022, and enter the results in the following table., A:Price index measures the cost of market basket of goods and services, Q:Question Find, Suppose that the following parameters apply to an open economy with a government that is running a balanced budget. The goal was to identify, Q:Comparative Advantage | = 1,500 ). Q:You are the Minister of Trade for a small island country with the following annual PPC: b. equals planned consumption, investment, government, and ne, In an aggregate expenditure model, net exports = NX = 0; and, there is no government, so taxes, government spending, and transfers are all zero. Unfortunately, not all of these models consistent - one model may predict that unemployment will fall if the central bank lowers the target interest rate while another may claim that such a change will not affect unemployment. If the loss (Government purchases remain at 400.). What level of government purchases is needed to achieve an income of 2,400? What is the equilibrium level of income?c. Q:Which of the following would be considered a leading indicator? Lets look at several of these non-income determinants of consumption and savings: You can likely think of other factors that are unrelated to income that could shift the Consumption and Savings Functions. The price of Salternative, a salt substitute, falls and we find that the substitution effect, A:Given The intercept is the value of C when Yd is equal to zero. 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. For the below ME alternatives, which machine should be selected based on the AW analysis., A:When more than two alternatives are offered for a project and their lifespans differ, the annual, Q:Kelsey purchases a retirement annuity that will pay her $1,500 at the end of every six In reality, this relationship need not hold. b) Draw a Keynesian Cross diagram showing the equilibrium values Y and AE. $10,200 But there are other things that influence consumption besides disposable income.