Suppose a closed economy has an intended investment of 200 and an aggregate consumption function given by C = 250 + 0.75Yd. Suppose also that the government spends 200 but collects no taxes. What is equilibrium output and income? (round your answer to the nearest whole value)

Suppose a closed economy has an intended investment of 200 and an aggregate consumption function given by C = 250 + 0.75Yd. Suppose also that the government spends 200 but collects no taxes. What is equilibrium output and income? (round your answer to the nearest whole value)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 2TY

See similar textbooks

Related questions

Q: Suppose that autonomous consumption (a) is 300, private investment spending (I) is 420, government…

A: We know, from the fundamental macroeconomic identity, Y = C(Y - T) + I + G Where Y represents the…

Q: Q.1.7 If the marginal propensity to consume increases: (2) (1) The slope of the consumption function…

A: Answer - Marginal propensity to consume - the marginal propensity to consume (MPC) is defined as…

Q: Assume that the level of autonomous consumption in an economy equals 600, the level of planned…

A: "Macroeconomic equilibrium occurs at a point where aggregate supply of the economy equates the…

Q: What is the effect of an increase in expected future income on the consumption function?

A: Increase in expected future income have certain effect on current consumption.

Q: Assume a closed economy with no government. Suppose that autonomous consumption equals $400, planned…

A: Autonomous consumption = $400 Initial Planned investment = $500 mpc = 0.9 Final Planned investment =…

Q: Suppose a closed economy has an intended investment of 200 and an aggregate consumption function…

A: The equilibrium level of output and income is the point where the aggregate expenditure is equal to…

Q: Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively,…

A: The marginal propensity to consume is a statistic that quantifies induced consumption, which…

Q: If consumption is $9 billion when disposable income is $0, and if the marginal propensity to save is…

A: According to the question given that the the level of autonomous consumption $9 billion and marginal…

Q: Assume a simple model with no government or foreign sector. If an increase in autonomous investment…

A: Here, it is given that change in expenditure (investment) is 100 due to which income (consumption)…

Q: Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.50Yd and…

A: Gross Domestic Product (GDP) is the value of all the goods and services produced domestically in a…

Q: If the consumption function in the economy is given as C = 400 + 0.6(Yd), what is the MPS? a. 0.6…

A: MPC = coefficient of Yd = 0.6 MPS = 1 - MPC = 1 - 0.6 = 0.4

Q: Suppose that autonomous consumption is 2,190, government purchases are 590, taxes are 0, planned…

A: An autonomous spending depicts the parts of an economy's total use that are not influenced by that…

Q: Calculate autonomous consumption expenditure from the following date about an economy which is In…

A: The economic activities in an economy includes activities by different entities. These are…

Q: Assume in country Y, the average marginal propensity to save is 0.2. When the aggregate income is…

A: Marginal Propensity to Save (MPS) is the amount of money an individual saves while disposable income…

Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…

A: National income refers to the total money income earned by the citizens of a country in a particular…

Q: 'Investment multiplier and marginal propensity to consume are directly related to each other'. Give…

A: Introduction- The idea that any increase in public or private investment spending has a more than…

Q: Suppose a government increases its purchases by $5 billion, and the marginal propensity to consume…

A: In an economy, the consumption and investment decisions of the people depends upon various factors…

Q: Consider an economy with the following consumption function: C = 400 + 0.60YD, and investment…

A: Consumption function: C=400+0.60YD .... (1) I=600 Marginal propensity to consume increases by…

Q: Average propensity to consume refers to the ratio of _________ expenditure to the corresponding…

A: When a household earns income then this income can be either consumed or saved. The measure of…

Q: What will be the impact on real GDP?

A: Investment determined independently of changes in income is known as Autonomous Investment. Marginal…

Q: Why would an increase in planned investment increase real GDP, but an unplanned increase in…

A: An optimistic approach towards the future growth of an economy leads to an increase in planned…

Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…

A: The national income is the total income earned by all the people of a country in a particular period…

Q: What would an increase in planned investment increase in real GDP, but an unplanned increase…

A: Real GDP(RGDP) measures the value of all final goods(g) and services(s) produced within a…

Q: Explain what the consumption function shows, and describe what is held constant along the…

A: The consumption function is an important concept of national income. It relates to the consumption…

Q: Suppose the consumption of an economy is given by C = 20 +0.6Y The following investment function is…

Q: Suppose GDP = $10,000, autonomous consumption is $600 and planned investment spending is $350, the…

Q: If consumption is $5 billion when disposable income is $0, and if the marginal propensity to consume…

A: Answer- Need to find- C(y) Given in the question- Consumption = $5 Billion Marginal propensity to…

Q: consumption function of a hypothetical Economy is given as:- C = 100 + 0.6Y Calculate the value of…

A: Marginal Propensity to consume alludes to the rate change in utilization for each one dollar of…

Q: If disposable income is 85 per cent of national income, the marginal propensity to consume (out of…

A: The measure which depicts the degree to which a consumer would in turn be spending or saving with…

Q: Consider the an economy described by the following equations Y = C+I+G C=Co+MPC YD I=d-e.r YD=Y-T…

A: For an economy, a macroeconomic model can be computed by putting together all these endogenous…

Q: Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and…

A: National income(Y) means the total of all the commodities manufactured by the people during a…

Q: Assume a closed economy in which, there is no government. If autonomous consumption is80, autonomous…

A: If the economy is closed and there is no government then the equilibrium output or income is equal…

Q: Explain the Keynesian, saving-consumption relationship, and interpret consumption and saving…

A: Keynesian consumption function gives the functional relationship between household consumption and…

Q: Suppose a closed economy has an intended investment of 100 and an aggregate consumption function…

A: Given information: C=250 + 0.75Yd -----> Consumption function I = 100 ------------> Investment…

Q: Suppose a closed economy has an aggregate consumption function given by C = 50 + 0.50Yd and…

A: Ans. The equilibrium level of income and output level is where AS = AD where AD stands for…

Q: Suppose that consumption equals $500 billion when disposable income is $0 and that each increase of…

A: The consumption function is the equation that shows the relation between consumption and the factors…

Q: Suppose that a certain country has an MPC of .9 and a real GDP of $400 billion. If its investment…

A: The total production of good and services across the sectors of economy in a particular period of…

Q: Which of the following will increase consumption spending? Group of answer choices a housing market…

A: To Find: What Increases Consumption Spending Given Options: A Housing Market Crash An Increase…

Q: Q.1.8 If the marginal propensity to consume increases: (1) The slope of the consumption function…

A: Marginal propensity to consume is the change in consumption that occurs due to the change in income.…

Q: Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.75Yd and…

A: The gross domestic product is the market value of final goods and services produced within the…

Q: What would an increase in planned investment increases real GDP, but an unplanned increase in…

A: The aggregate expenditure model determines the equilibrium level of real GDP using components of…

Q: If consumption is $6 billion when disposable income is $0, and if the marginal propensity to save is…

Q: Answer the questions on the basis of the information given in the following diagram: Guideline…

A: Ques 1) Given : C' = 54 C = C' + b Y Where C' = autonomous consumption b = MPC

Q: You are given the following information about a closed economy with no government: Consumption = 445…

A: Autonomous expenditures are those made by a government that are necessary and made regardless of the…

Q: The following table shows consumption (C), investment spending (I), and government purchases (G), in…

A: If the income tax rate is 25%, the disposable income (after tax) is equal to 75% of the real GDP.…

Q: If consumption is $8 billion when disposable income is $0, and if the marginal propensity to consume…

A: consumption function-C(y)=C+cYdwhere C is the autonomous consumption and,c is the marginal…

Question

100%

Suppose a closed economy has an intended investment of 200 and an aggregate consumption function given by C = 250 + 0.75Yd. Suppose also that the government spends 200 but collects no taxes.

What is equilibrium output and income?

(round your answer to the nearest whole value)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

In a simple closed economy, consumption is given by the relationship C=0.75Y, where C is consumption expenditure and Y is GDP. If government expenditure is £150 million and investment is £50 million, what will be the value of GDP of the economy? a) £200 million b) £750 million c) £315 million d) £800 million
Assume taxes are zero and an economy has a consumption function of C = 0.89 (Yd) + $299.19. How much consumption takes place if disposable income is equal to 4,848.76? Round your answer to two digits after the decimal.
Assume that the consumption function for the above economy is C = 1000 + .75Yd fill in the empty cells. (All Figures are in Billions of Dollars) Output Taxes Disposable Income Consumption Spending Saving Investment Government Aggregate Expenditure 5000 1000 750 750 7000 1000 750 750 9000 1000 750 750
Suppose a closed economy has an intended investment of 100 and an aggregate consumption function given by C = 250 + 0.75Yd. Suppose also that the government spends 150 but collects no taxes. What is equilibrium output and income?
Assume that the consumption function for the above economy is C = 1000 + .75Yd fill in the empty cells. (All Figures are in Billions of Dollars) (3 Points) Output Taxes Disposable Income Consumption Spending Saving Investment Government Aggregate Expenditure 5000 1000 750 750 7000 1000 750 750 9000 1000 750 750
On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data. ? CONSUMPTION (Billions of dollars) 700 600 500 400 300 200 100 0 -100 0 100 200 300 400 500 600 DISPOSABLE INCOME (Billions of dollars) 700 800 From the preceding data, you know that the level of savings in the economy last year was $ economy is billion and the marginal propensity to save in this Suppose that this year, disposable income is projected to be $500 billion. Based on your analysis, you would expect consumption to be $ billion and savings to be $ billion.
The economy of a country is characterized by the following equations: Aggregate consumption function C=100+0.50 (Yd), where Yd is the disposable income. Total taxes T=100, aggregate investment I= 100 and government expenditures G=100. What is the level of aggregate consumption at the equilibrium? 450 300 400 350 250
Assume an economy has a consumption function of C = 0.87 (Yd) + $270.18. Additionally, this economy has investment spending = $878.78, government purchases $299.38, taxes = $111.59, exports = $209.28, and imports $289.40. What is the equilibrium level of GDP based on this information? Round your answer to two digits after the decimal. =
The consumption function for a closed economy with no government sector is given by the equation: C = £200 million + 0.8 Y where C is aggregate consumption and Y is national income. (i) Calculate the value of aggregate savings if the level of national income is £4000 million. Show all your workings. (ii) Calculate the equilibrium level of national income if the level of planned investment is £600 million. Show all your workings. (iii) Calculate the level of aggregate consumption at the equilibrium level of national income if the level of planned investment is £1000 million. Show all your workings. (iv) Calculate the change in national income if planned investment rose from £600 million to £800 million. Show all your workings.
You are given the following consumption function: C = RM150 million + 0.75Yd Based on the above consumption function, answer the following questions: How much is: Autonomous consumption Autonomous saving How much is the disposable income when saving is zero? If there an investment of RM200 million, what will be the new equilibrium level of income.
Graphically illustrate the aggregate consumption and saving functions. Explain these functions with at least 200 words. You may give examples.
B) In a closed economy, the functions for consumption, investment, government expenditure and taxation are given as below (in RM million). Consumption function : C=500 + 0.75 Yd Investment function | = 800 Government expenditure :G = 400 Тахation :T= 200 + 0.2 Y i. Find the equilibrium level of national income for the economy stated above. ii. Draw a graph to show the equilibrium of national income by using AD=AS approach. Find the total value of taxation when the national income is at equilibrium. iii.