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- Question 1 Suppose the information below shows aggregate values for a hypothetical economy. Real GDP is equal to potential GDP. All figures are billions of dollars. Potential GDP Net tax revenue Government purchases = = = 950 = 125 140 Desired Investment Desired consumption (a) What is the level of private saving? (b) What is the level of public saving? (c) What is the level of national saving? (d) Is the interest rate at its equilibrium level? Provide a justification. 10 80044. An increase in the general price level in the economy a) Will increase the purchasing power of consumers' wealth and decrease consumption spending. b) Will increase demand for, and decrease supply of loanable funds, causing the interest rate to increase which in turn will cause investment spending to fall. c) Makes domestic goods more expensive than foreign goods than before which will tend to decrease exports and increase imports, thus lowering net exports. d) All the above e) Only (b) and (c) are true43. The table below shows aggregate values for a hypothetical economy. Suppose this economy has real GDP equal to potential output. Potential GDP $14 000 Government purchases $2100 Investment $300 Consumption $10 000 Net tax revenues $2000 TABLE 25-3Refer to Table 25-3. What is the level of national saving for this economy? $2000 $1900 $1800 $2500 $1500
- If consumption expenditures are $1800 million, gross investment is $450 million, imports are $350 million, exports are $180 million, government expenditure on goods and services is $120 million, and government transfer payments are $180 million and net taxes are $250 million; a) Calculate the GDP. b) Is there budget deficit or surplus? Calculate. c) How much is the private (household) saving?49. What could increase investment spending? a) An increase in inflation. b) An increase in market rate of interest. c) An increase in business taxes. d) A decrease in the Index of Business Confidence e) A technological breakthrough creating new products or improving production efficiency28. What is the level of investment, I? (A) $250 billion. (B) $305 billion. (C) $345 billion. (D) $555 billion. The next two questions involve the following information. The real interest rate, r, is the nominal interest rate, i, minus inflation, 7. In formal terms, r = i- T. For example, if an investment offers an annual return of 5 percent, and inflation is 2 percent, then the real interest rate is 3 percent. 29. You purchase a $1,000 face-value bond for $800. The coupon is $100 per year, and inflation is 4 percent per year. What is the nominal yield on the bond? (A) 6 percent. (В) 8.5 рercent. (C) 10 percent. (D) 12.5 percent. 30. You purchase a $1,000 face-value bond for $800. The coupon is $100 per year, and inflation is 4 percent per year. What is the real coupon rate on the bond? (A) 6 percent. (В) 8.5 percent. (C) 10 percent. (D) 12.5 percent.
- 11. Assume that Government Spending (G) decreases by 25, what will be the change in Output (Y) if (a) MPC 0.8. (b) MPC-0.75. (c) MPS=0.4. (d) MPS=0.3.perating under a balanced government budget. Real Interest Rate (Percent) 2 National Saving (Billions of dollars) 65 60 55 50 45 40 Domestic Investment (Billions of dollars) 25 35 45 55 65 75 Net Capital Outflow (Billions of dollars) -20 -15 -10 5 0 58- A person’s disposable income decreases, and his personal income remains unchanged. This is because of ______. a. Decreased personal taxes b. Increased personal taxes c. Increased corporate taxes d. Unemployment reasons
- 1(a) (b) (c) 2 (b) (c) The following statistics are given relating to a hypothetical closed economy for the financial year 2022.GDP = $5000, Consumption Expenditure = $3000, Govt Purchase = $2000, Budget deficit = $1000. Find out tax revenue, private savings, public savings, national savings, and national investment. Assume the government announces a Tax Cut of $500. If consumers save the full proceeds of the tax cut amount, i.e., $500, then analyze its impact on private savings, public savings, national savings, and investment. Assume the government announces a Tax cut of $500. If consumers spend the full proceeds of the tax cut amount, i.e., $500, then analyze its impact on private savings, public savings, national savings, and investment. In a hypothetical economy, demand for loanable funds (DLF) is represented by I = 10000-800r, and supply of loanable funds (SLF) is represented by S = 200r, where I = Investment, S = National saving, r = real interest rate. Assume the loanable fund…1. From the table below, gross domestic product equals: a. $1,110 b. $1,265 c. $1,470 d. $1,695 Personal Income Taxes $130 Government Purchases of Goods and $150 Services Gross Private Domestic Investment $230 Net Interest $75 Sales Taxes Net Exports of Goods and Services Personal Consumption Expenditures Depreciation $35 $55 $725 $1756. Expenditures and Income Approaches Consumption Expenditures Wages Taxes on Production and Imports Government Purchases Statistical Discrepancy Imports Undistributed Corporate Profits Rent Proprietor's Exports Dividends Depreciation Income Interest Gross Private Domestic Investment Corporate Income Taxes Corporate Profits Net Foreign Factor Income $69000 $76000 $16000 $58000 $11000 $47000 $14000 $42000 $15000 $34000 $22000 $24000 $31000 $41000 $18000 $54000 $17000 Complete parts a and b. a. Given the numbers above, solve for Real GDP using the expenditures approach. Given the numbers above, solve for the National Income (NI). b.