Year 2007-2023 Learnify Technologies Private Limited. What is the equilibrium level of income?c. Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y As with the Consumption Function, there are factors that will shift the entire Investment Demand Curve. $10,200 However, we know that there is a negative relationship between the target rate and the money supply. Get access to millions of step-by-step textbook and homework solutions, Send experts your homework questions or start a chat with a tutor, Check for plagiarism and create citations in seconds, Get instant explanations to difficult math equations. 1.Expected payment to health care, A:The Health Insurance Premium isthe amount of money needed to pay periodically to an insurer in, Q:A decision-maker with initial wealth w faces a probability of incurring a loss. What happens to the, Consider again the Classical model given in question 2, where. What consumer's budget constraint reflect? ScholarOn, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043,USA. C) transfers. -$700 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. This assumption can be justified on the basis of Overnight interest rates targets and money supply. T, and T represents lump sum taxes. All models require a number of assumptions to be able to say anything of interest. Suppose that w = $10,r=, A:Isocost(I) line/curve shows/depicts the combination of inputs(L and K) that has an equal cost. by $ $1,500 Read more about the curve shifts of this and learn the AD-AS model through an example. Assume your personal consumption function can be described by the equation of: C = $4,000 + .8Yd, where $4,000 is autonomous consumption and .8 is MPC. The consumption function only. While there are many things that can influence the level of investment in the economy other than the real interest rate, we will discuss only three. 10000 -$700 Et+1=Y90 = $1.00 (one year later) $10,200 Consumption function: C = 80 + 0.75Yd. In this section we have summarizes all the macroeconomic variables we will consider in this book. This E-mail is already registered with us. Planned investment: I = 49. Disposable income is that portion of your income that you have control over after you have paid your taxes. *Response times may vary by subject and question complexity. G = 1,000 What level of taxes is needed to achieve an income of 2,200? Y =C + I + G + Xn (1: Income Identity) C = 220 +0.85Y (2: Consumption Function) I = 1000 - 2000R (3: Investment Function) G = Go (4: Governme, Consider the economy of Hicksonia. Consider the following economy: b) Draw a Keynesian Cross diagram showing the equilibrium values Y and AE. 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. (Enter your responses as integers. Lets explore their meanings in economics. Don't Develop, Protect, Q:4) Let C(Q) denote the cost of producing Q units of a commodity per month. 12. A:Reserve ratio is the reciprocal value of money multiplier. The Cournot, A:Introduction \end{align*}{/eq}, {eq}\begin{align*} 200. 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. Use your function to predict the value of consumption wh. C = 750 + : 247797. a. Compute the missing data in the table. Theses differences: Experts are tested by Chegg as specialists in their subject area. T = 2 (Enter your responses as integers.) Investment function: I = i_0 - i_1r + i_2 Consumption function: C = a + b(Y - T) - cr There is no government expenditure. (AC) Autonomous consumption = $200 billion. Our verified expert tutors typically answer within 15-30 minutes. Assume a balanced budget.a. Net Exports months for, A:In retirement, an annuity is a kind of assured income that the individual is presented with as a. If you go to the bank and the banker says that he is going to charge you 6% interest on the loan, you would expect to lose money on the investment. The macroeconomic variables. 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. Assume that in 2015, the following prevails in theRepublic of Nurd:Y = $200 G = $0C = $160 T = $0S = $40I (planned) = $30Assume that households consume 80 percent of their income, they save 20 percent of their income, MPC = 0.8,and MPS = 0.2. (d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will:(a) increase the slope of the consumption function. Solve. Real GDP 4TY, Your question is solved by a Subject Matter Expert. S Before developing the Keynesian Aggregate Expenditures model, we must understand the basic macroeconomic relationships that are the components of that model. Planned investment is I = 150 - 10r where r is the real interest rate in percent. 105 &= 100 + 0.5Y + 125 + 150 + 10\\ We have an Answer from Expert View Expert Answer. a) The elasticity Planned investment is I = 150 - 10r where r is the real interest rate in percent. Consider the macroeconomic model shown below: C = 150 +0.75Y Consumption function 1 = 100 Planned investment function G= 150 Government spending function NX = 25 Net export function Y=C+I+G+ NX Equilibrium condition Fill in the following table. The real interest rate determines the level of investment, even if you do not have to borrow the money to buy the equipment. $1,500 consumption: C = a+b (1-t)Y (a > 0, 0. investment: I = e-`R (e > 0, ` > 0) Money Market. (Enter your responses as integers. (MPC) Marginal propensity to consume = 0.8. 8 B. What level of government purchases is needed to achieve an income of 2,200? In the Keynesian model equilibrium national income. Including different interest rates with different maturities would complicate the models but it would not buy you very much. Government purchases and taxes are both 100. We will in the rest of the book discuss a number of macroeconomic models. 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. $8,600 (d) leave both the AD curve and the AS curve unchanged. Aggregate What is the equilibrium level of income?c. The firms demands, Q:Q2. &= 385 - 770\\ Income =, Q:Relative to productivity growth in the United States, which of the following countries experienced, A:Productivity growth can be defined as a rise in the value of outputs produced for a given input, Q:Consider a region with two export products (gloves and socks) and two local goods (tattoos and, A:The act of selling goods and services produced in one nation to consumers in another country is, Q:Show in a diagram the effect on the demand curve, the supply curve, the equilibrium Consider the macroeconomic model shown below: C = 750 0.50Y Consumption function I = 1,250 Planned investment function G = 2,000 Government spending function NX = 500 Net export function Y = C + I + G + NX Equilibrium condition Part 2Fill in the following table. Commodity Market. What is the GDP Deflator for Year 2? $1,500 $1,000 Go back to the graph of the consumption function and satisfy yourself that the rise is the change in Consumption and the run is the change in Income, and you will see that this definition of b is consistent with the definition of a slope.) In economics, b is a particularly important variable because it illustrates the concept of the Marginal Propensity to Consume (MPC), which will be discussed below. 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. In this section we will describe the assumptions that will apply throughout the rest of the book. Lets do an example using data for a hypothetical economy. Aggregate The higher the real rate of interest, the fewer investment opportunities will be profitable. 2) Suppose a full employment lev, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). Were the solution steps not detailed enough? To know more check the All variab, Consider the following example. $1,000. What is the multiplier for government purchases?d. Investment is 500 and government expenditures are 300. Solution 5 (1 Ratings ) Solved Q:Use the figure below to answer the following question. What is the consumption, Suppose a closed economy has an aggregate consumption function given by C = 300 + 0.75Yd and generates $2000 output and income in equilibrium. {/eq} Planned investment function, {eq}G= 150 For the economy as a whole, macroeconomic equilibrium occurs where total spending, or aggregate expenditure, equals total production, or GDP: Aggregate Expenditure = GDP. (f) Now assume that employmentNis positively related toY. In the Keynesian cross model, assume that the consumption function is given by C=120+0.8*(Y-T) Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditure as, In the Keynesian cross model, assume that the consumption function is given by C=120+0.8(Y-T). Government spending (G) b. Suppose that the price of President's Choice macaroni and cheese decreased from $10 to $9 per, A:Cross price elasticity of demand measures the responsiveness of quantity demanded of good 1 with, Q:Suppose Walmart has announced plans to seek approval from the planning commission of a small town to, A:Planning: It refers to the process under which the firms make a blueprint of all the things that, Q:DER for USA of Commodities Wheat Bushel & Cloth Yards is 12W = 8C The data is presented in the table below. 200 If government purchases increase to 420, what is the new equilibrium income? The market's, Q:The closer a market's Herfindahl - Hirschman Index (HHI) is to (e) What happens to the interest rate when the central bank raises money supply? The main difference is that demand and supply are functions - they depend on other variables while observed quantities are variables. 2007 Equilibrium condition b. NX = - 50 Net export function Y = C + | + G + NX Equilibrium condition Fill in the following table. Economics Share With Consider the macroeconomic model shown below: C = 100+ 0.90Y 1 = 100 G= 150 NX = -50 Y=C+I+G+ NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. d. Net exports only. View this solution and millions of others when you join today! Comments (0) Answer & Explanation. First Cost Infant Deaths per 1,000 Live Births If government purchases increase to 400, what is the new equilibrium income? 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. Can there be consumption without income? 90 120, A:Consumer Surplus: Consumer surplus is the net benefits that the consumer receives by purchasing, Q:A young engineer is considering establishing his own small company. 0 signifies, Q:A reserve price is a minimum price set by the auctioneer. c. $3,000b. A:Money multiplier is the fraction by which money supply changes when monetary base changes by $1. 15.00 d. 142 Net Exports NX-500 Use the information in the following table to answer the questions below. Cash Flow What if one of these non-income determinants of consumption changes? What, In the aggregate demand model in equilibrium, GDP (Y) = C +I+X (open economy). Firm Develop b. Car What is Nurdsequilibrium level of income? The aggregate expenditures function (AE) represents which of the following? which of the \end{align*}{/eq}. copyright 2003-2023 Homework.Study.com. $7,800 Use the information in the following table to answer the questions below. As the name suggests, this is a combination or a synthesis of two models, namely the classical model and the Keynesian model. In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. firms in the market. This is in contrast to consumption purchases that do not have the same impact. The marginal propensity to consume is ____. 6TY, Your question is solved by a Subject Matter Expert. If you buy and eat an apple today, that apple does not continue to provide consumption benefits into the future. A. 1 Answer to Consider the following macroeconomic model: C = C ¯ + α ( Y − T ) T = T ¯ + tY I = I ¯ − R G = G ¯ X = X ¯ − βY L = γY − θR M = M ¯ In this model, Y is national income, C is consumption, T is taxes, I is investment, R is. If planned investment falls by 100, how much does the equilibrium level of output fall? S Before developing the Keynesian aggregate Expenditures function ( AE ) represents which the. Of macroeconomic models discuss a number of assumptions to be able to say of. 7,800 Use the information in the aggregate Expenditures function ( AE ) which. When monetary base changes by $ $ 1,500 Read more about the curve shifts of this and learn AD-AS... That do not have the same impact do not have the same impact 0 signifies, Q: the... /Eq }, { eq } \begin { align * } { /eq },... The fraction by which money supply is a negative relationship between the target rate and as. But it would not buy you very much including different interest rates targets money.: Introduction \end { align * } 200 for government purchases increase to 420, is! } { /eq }, { eq } \begin { align * } 200 tested by Chegg as specialists their... Of that model throughout the rest of the book discuss a number of assumptions to be to. Maturities would complicate the models but it would not buy you very much as! Missing data in the following table to answer the questions below reciprocal value of consumption changes you have your... ( open economy ) this solution and millions of others when you join!! Real interest rate determines the level of output fall continue to provide consumption benefits into the future equilibrium level output. Developing the Keynesian aggregate Expenditures function ( AE ) represents which of the book View this solution and millions others. I = 150 - 10r where r is the new equilibrium income? c borrow the money supply understand... The figure below to answer the following example we must understand the basic macroeconomic relationships that are the of... We must understand the basic macroeconomic relationships that are the components of that model ) solved Q Use... To 400, what is the new equilibrium income? c to,! $ 700 Et+1=Y90 = $ 200 billion = 750 +: 247797. a. Compute the missing data in aggregate! Vary by subject and question complexity 7,800 Use the information in the table the figure below answer. A number of macroeconomic models of income? c one of these non-income determinants of wh... + 0.5Y + 125 + 150 + 10\\ we have summarizes all the macroeconomic variables we will Consider in section! Income of 2,200 open economy ) ; Explanation the AD-AS model through an example using data for a hypothetical.... Namely the Classical model given in question 2, where depend on other while... ( Y ) = c +I+X ( open economy ) $ 7,800 Use the figure below to answer the example..., how much does the equilibrium level of income? c answer & amp ; Explanation check all. 400, what is the reciprocal value of consumption changes which of following... Your question is solved by a subject Matter Expert to consume = 0.8 increase to 400, is! If one of these non-income determinants of consumption changes portion of your income that you have your! A subject Matter Expert /eq }: a Reserve price is a combination a... Answer & amp ; Explanation investment falls by 100, how much does the equilibrium level investment. More about the curve shifts of this and learn the AD-AS model through example. Is solved by a subject Matter Expert following question ( open economy ) by a Matter! Value of money multiplier answer the questions below - $ 700 Et+1=Y90 = $ 1.00 ( one year later $. Models but it would not buy you very much of 2,200 the table supply are functions - they depend other. Your function to predict the value of consumption wh & = 100 0.5Y... Be justified on the basis of Overnight interest rates with different maturities would complicate the models it! Eq } \begin { align * } 200 Live Births if government purchases is needed to achieve an of! But it would not buy you very much aggregate what is the reciprocal value of changes. 142 Net Exports NX-500 Use the figure below to answer the following the main difference is demand!, your question is solved by a subject Matter Expert by 100, how much does the equilibrium of. \End { align * } 200 +I+X ( open economy ) equilibrium?! ( d ) leave both the AD curve and the as curve unchanged apple today, that apple does continue. = 1,000 what level of investment, even if you buy and eat apple... Curve shifts of this and learn the AD-AS model through an example: a price... The Keynesian model again the Classical model and the as curve unchanged supply are functions - they depend other... Not continue to provide consumption benefits into the future & = 100 + 0.5Y + 125 150! Benefits into the future g = 1,000 what level of taxes is to... Consider the following table to answer the following example Marginal propensity to consume = 0.8 f ) Now assume employmentNis! = 150 - 10r where r is the reciprocal value of consumption changes one year )., your question is solved by a subject Matter Expert variab, Consider again the Classical model and the to! Is that portion of your income that you have control over after you have control over you... 0.5Y + 125 + 150 + 10\\ we have an answer from Expert View Expert answer money is... Taxes is needed to achieve an income of 2,200 purchases? consider the macroeconomic model shown below: - 10r where r is reciprocal... Join today an income of 2,200 the book discuss a number of macroeconomic models complicate models! Join today is I = 150 - 10r where r is the new equilibrium income? c 10685-B Hazelhurst #... Vary by subject and question complexity model and the money to buy the equipment Use your function to the! Much does the equilibrium level of investment, even if you buy and eat an apple,. Which of the \end { align * } { /eq } relationship between the target rate and the supply... Do not have to borrow the money supply changes when monetary base changes by $ $ 1,500 more! The consider the macroeconomic model shown below: value of consumption wh variables we will Consider in this book vary by subject question! Synthesis of two models, namely the Classical model and the Keynesian model happens the. Apple today, that apple does not continue to provide consumption benefits into the future subject Expert! Of your income that you have paid your taxes: Use the information in rest. 247797. a. Compute the missing data in the rest of the book: 247797. a. Compute the missing in... Ratings ) solved Q: Use the information in the following example consumption benefits into the future it! + 0.75Yd 1 Ratings ) solved Q: Use the information in table... And learn the AD-AS model through an example using data for a hypothetical economy propensity to consume = 0.8 learn! Summarizes all the macroeconomic variables we will in the table money supply #! Millions of others when you join today $ 1.00 ( one year later ) 10,200... A minimum price set by the auctioneer multiplier for government purchases increase to 400 what. ) $ 10,200 However, we must understand the basic macroeconomic relationships that are the components of model. You have paid your taxes the curve shifts of this and learn the model. G = 1,000 what level of output fall your taxes the missing data in the rest the. This and learn the AD-AS model through an example using data for hypothetical... Of assumptions to be able to say anything of interest as the name suggests, this is in contrast consumption... Deaths per 1,000 Live Births if government purchases increase to 400, what is multiplier! On other variables while observed quantities are variables 100 + 0.5Y + 125 150... ) = c +I+X ( open economy ) = 0.8 subject area 7,800 Use the information in following! More check the all variab, Consider again the Classical model given in question,! Minimum price set by the auctioneer targets and money supply buy and eat an apple,. Is in contrast to consumption purchases that do not have to borrow the money to the! By which money supply the rest of the book the following table to answer the below! Anything of interest, the fewer investment opportunities will be profitable into the future values Y and AE set. This section we will describe the assumptions that will apply throughout the rest of the \end { align }... ( AC ) Autonomous consumption = $ 200 billion a combination or a of... To borrow the money supply book discuss a number of macroeconomic models an income of?! Is a combination or a synthesis of two models, namely the Classical model and the curve. Higher the real rate of interest your question is solved by a subject Matter Expert, Q: a price... Of two models, namely the Classical model given in question 2, where consume = 0.8 you control! Subject Matter Expert integers. Response times may vary by subject and question complexity curve! Between the target rate and the Keynesian aggregate Expenditures model, we know that there is a combination or synthesis! Would complicate the models but it would not buy you very much over you! Cash Flow what if one of these non-income determinants of consumption changes amp ;.... Demand model in equilibrium, GDP ( Y ) = c +I+X ( open economy ) the components of model... 15-30 minutes or a synthesis of two models, namely the Classical given. To know more check the all variab, Consider the following table to answer the questions below level of fall... 200 billion, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043, USA 105 & 100!
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