Suppose a closed economy has an aggregate consumption function given by +0.50Yd and generates $2200 output and income in equilibrium. Suppose also that the government collects a lump-sum tax of 400. How much will the private sector be saving total in equilibrium? (round your answer to the nearest whole value) Your Answer:
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- Economists often argue that a large increase in government purchases – such as for the military – will crowd out private-sector spending. Use the investment-saving diagram to defend or to refute their premise.1.a Suppose the country of Freelandia has an MPC of .85 and a real GDP of $200 billion. If its investment spending decreases by $3 billion, what will be its new level of real GDP?In an economy, consumers spend 800 million regardless of their level of disposable income. In addition, they spend 75% of their yearly disposable income. * Investment is fixed at 250 million, Gvt expenditures are 120 million, net taxes are 100 million, exports are 170 million. Imports are 15% of the level of disposable income. Q, what is this economies equilibrium level of output Q how much would net export be when this economy is at equilibrium output
- Fill in the aggregate saving column in the following table. (Include a minus sign if necessary.) Aggregate Income, Y $0 100 200 300 400 500 600 Aggregate Consumption, C $200 250 300 350 400 450 500 The value of the MPC is one decimal place.) T Aggregate Saving, S $-200 150 100 50 0 50 100 (Round your response to CXIE DE Aggregate consumption, C Aggregate saving, S 700- 600- 500- 400 300- 200 100- 0 -100- -200- 300- -400- 100 200 300 400 500 Aggregate income, Y 600If private investment increases by $1, real GDP increases by $4. What do we call this in economics? Can you explain why this might happen?How to calculate mpc?
- a. Suppose the government increases both taxes (7) and government purchases (G) by equal amounts. Assuming income (Y) is fixed by the factors of production, the change in national saving (AS) will be (MPC-1) * AT. (1-MPC) x AT. b. The larger is the MPC (the closer it is to 1), the will be the increase in the interest rate. will be the decline in investment, and theEconomics Assume you are 20 year old, with zero initial wealth, planning to work until the age of 50 and expecting to live to age of 75. You are expected to earn a constant annual salary of €70,000. Task: estimate lifetime consumption Now, suppose your €10,000 transitory increase to your income in your first year of work, what happens to your lifetime income?. What is the magnitude of the transitory MPC, which completely smooths income?Given the following data for a closed economy 1= 3400 Planned Investment G=4000 Government Spending C= 3,800 + 0.8 Yd Consumption function T= 1000 Taxes Refer to problem 1. The AE function is equal to O AE =10400+0.8Y O AE= 11200+0.8Yd AE= 7800+0.8Y A and B are correct Refer to problem 1. What is the equilibrium level of income?
- 4.5 You are given the following data concerning Freedonia, a legendary country: (1) Consumption function: C = (2) Investment function: I (3) AE = C + I (4) AE = Y a. What is the marginal propensity to consume in Freedonia, and what is the marginal propensity to save? b. Graph equations (3) and (4) and solve for equilibrium 200 + 0.8Y 100 %3D income. c. Suppose equation (2) is changed to (2') I = 110. What is the new equilibrium level of income? By how much does the $10 increase in planned investment change equilib- rium income? What is the value of the multiplier? d. Calculate the saving function for Freedonia. Plot this sav- ing function on a graph with equation (2). Explain why the equilibrium income in this graph must be the same as in part b.Problem 1. The following specifications are given for an economy: Consumption, C = 250 + 0.75 Yawhere Y, is disposable income Government expenditure G 150 Investment I = 80 Taxes T 200 (i) Find the equilibrium level of income (Y), Consumption (C) and Private Sector Saving (S) (ii) Using the value of tax multiplier, how much will income increase if taxes are reduced by 30 ?Suppose you have the following information about a fictitious economy. Assume there are no taxes in this economy. Disposable Income and Consumption Disposable lIncome (dollars) SO Consumption (dollars) $4,000 11,000 8,000 16.000 24,000 32,000 40,000 18,000 25,000 32,000 39,000 structions: In parts a and c, enter your answers as a whole number. In part b, round your answers to