3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households are $12 billion, household consumption is $16 billion, and the marginal propensity to consume (MPC) is 0.7. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 05 10 15 20 25 30 35 40 45 50 DISPOSABLE INCOME (Billions of dollars) Consumption Function ? Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and that MPC = 0.7, what will be the new household consumption? $23.7 billion $19.5 billion $22.3 billion $21.6 billion Grade It Now Save & Continue Continu
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- Gross Domestic Product Explain how net exports affect the US economy. Describe both positive and negative impacts on GDP. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other expenditure components of GDP? You have the following information on 3 countries: Soccerland, Handeggland, and Neverland How long will it take until Soccerland’s GDP increases by 75%? How long will it take until Soccerland and Handeggland have the same GDP? Soccerland’s population is not happy that, eventually, Handeggland is going to have higher GDP than their country. They feel that they are a much better country, so they are going to work harder to ensure that Handeggland will never catch up with Soccerland. If Soccerland’s new growth rate is constant every year, what is the minimum growth rate that ensures that Soccerland will always have a higher GDP than Handeggland? Neverland’s ambition is to host the World Cup. At the…3. Finally, think about the following applied situation: An economist wants to estimate a line that relates personal consumption C and disposable income I. The economist interviews a few households and obtains the following data: Income Consumption (thousands of dollars) (thousands of dollars) 20 18 18 13 27 21 36 27 37 26 45 36 50 39 c) What is the interpretation of the rate of change? Clearly state the units for the slope and write a sentence explaining what the rate of change tells us in this case.In the below table, C is consumption expenditure, Iis investment, G is government expenditure, and NX is the net exports. All entries are in million dollars. (SHOW THE STEPS OF CALCULATIONS) c) What is the unplanned inventory change when GDP is equal to $2200 million? d) How much is the level of savings when income is $2300 million?
- 3. The consumption function Suppose that national income in a country is $30 billion, taxes paid by households is $10 billion, household consumption is $18 billion, and the marginal propensity to consume (MPC) is 0.8. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. CONSUMPTION (Billions of dollars) 50 45 40 35 30 25 20 15 10 5 0 0 5 + + + 10 15 20 25 30 35 40 DISPOSABLE INCOME (Billions of dollars) O $25.2 billion $26.8 billion $24.4 billion 45 0.8, Suppose now that country's national income increases to $34 billion. Assuming the amount paid in taxes is fixed at $10 billion and that MPC = what will be the new household consumption? $21.2 billion 50 Consumption Function (?)Real-Time Data Analysis Exercise The following table contains the most recent household expenditure data from FRED*. *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Using the data from FRED, compute the value for personal consumption expenditures for the first quarter of 2021. (Enter your response rounded to one decimal place.) Title Value Personal Consumption Expenditures $ 15,069.2 billion $1,938.577 billion Personal Consumption Expenditures: Durable Goods Personal Consumption Expenditures: Nondurable Goods $3,269.759 billion $1,049.521 billion $9,860.896 billion Private Residential Fixed Investment Personal Consumption Expenditures: Services According to these data, the share of total household expenditures devoted to goods is 34.6 percent. (Enter your response rounded to one decimal place.) From this result it may be concluded that, all else constant, any given reduction in household spending will be felt more significantly in…Real-Time Data Analysis Exercise The following table contains the most recent household expenditure data from FRED*. *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Using the data from FRED, compute the value for personal consumption expenditures for the first quarter of 2021. (Enter your response rounded to one decimal place.) Title Value Personal Consumption Expenditures $ billion $1,938.577 billion $3,269.759 billion $1,049.521 billion Personal Consumption Expenditures: Durable Goods Personal Consumption Expenditures: Nondurable Goods Private Residential Fixed Investment Personal Consumption Expenditures: Services $9,860.896 billion
- 2. From what was learned in class, explain what the values of the slope and vertical intercept of the aggregate consumption function mean from an economic perspective. Income-expenditure equilibrium Using the data in the following table to complete the following questions. GDP YD Planned (billions of dollars) $0 $0 $200 $100 400 400 500 100 800 800 800 100 1,200 1,200 1,100 100 1,600 1,600 1,400 100 2,000 2,000 1,700 100 2,500 2,500 2,000 100 3,000 3.000 2,300 100 1. Complete the columns for AEPlanned and unplanned in the table. 2. What is the value of the MPC? 3. What is the aggregate consumption function? AE Planned Unplanned 4. What is the equation for the planned aggregate expenditure function? 4. 5. What is the value of income-expenditure equilibrium GDP, (Y*)? 6. Explain in economic terms what happens when not in the income-expenditure equilibrium? Both when GDP > AE planned and GDP < AE planned. For each situation what needs to happen to move the economy toward equilibrium?.In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is C= 100 +0.75Y Investment is equal to 400. In this economy, equilibrium GDP is $ (Round your answer to the nearest dollar) 1.) Using the point drawing tool, on the graph to the right, indicate the real GDP point that you found above Label the point 'E' 2) Using the line drawing tool, carefully graph the consumption plus investment line Properly label your line Carefully follow the instructions above, and only draw the required objectsA) Elucidate how an economy’s income must always equal its expenditure. B) Assume a hypothetical economy that produces only one good – Peanut Butter. In year 1, the quantity produced is 4 packs and the price is Rs.400 per pack. In year 2, the quantity produced is 5 packs and the price is Rs.500 per pack. In year 3, the quantity produced is 6 packs and the price is Rs.600 per pack. Year 1 is the base year. 1) What is nominal GDP for each of these three years? 2) What is real GDP for each of these years? 3) What is the GDP deflator for each of these years? 4) What is the percentage growth rate of real GDP from year 2 to year 3? 5) What is the inflation rate as measured by the GDP deflator from year 2 to year 3? 6) In this one-good economy, how might you have answered parts (4) and (5) without first answering parts (2) and (3)?
- a) Elucidate how an economy’s income must always equal its expenditure. b) Assume a hypothetical economy that produces only one good – Peanut Butter. In year 1, the quantity produced is 4 packs and the price is Rs.400 per pack. In year 2, the quantity produced is 5 packs and the price is Rs.500 per pack. In year 3, the quantity produced is 6 packs and the price is Rs.600 per pack. Year 1 is the base year. a) What is nominal GDP for each of these three years? b) What is real GDP for each of these years? c) What is the GDP deflator for each of these years? d) What is the percentage growth rate of real GDP from year 2 to year 3? e) What is the inflation rate as measured by the GDP deflator from year 2 to year 3? f) In this one-good economy, how might you have answered parts (d) and (e) without first answering parts (b) and (c)? kindly solve all the parts1. Which pair of percentages most accurately represents aggregate expenditure components of GDP during the last decade? The numbers below represent average percentages for each variable. Select one: a. C = 68% G = 5% b. C = 30% G = 20% c. C = 68% X-M = -4% d. C = 47% I = 16% %3D %3D 2. You are provided with the following information pertaining to the price index for bread. CY equals current year. BY equals base year. Year Price CY Price BY Price Index 2011 $2.50 $2.50 100 2012 $2.80 $2.50 112 2013 $3.00 $2.50 120 Identify the accurate statement or statements below; Select one: a. the price level increased 12% between 2011 and 2012 b.the price level increased 8% between 2012 and 2013 c. the price level increased 7.14% between 2012 and 2013 d. a. and b. above e. a. and c. aboveGive typing answer with explanation and conclusion what is the US GDP for the first quarter and second quarter of 2021? What is the personal consumption expenditures for the first quarter and second quarter of 2021?