4-14 If government purchases increase to 400, what is the new equilibrium income? Net export function First Cost People do this all the time. Aggregate In, A:The exchange rate between two currencies refers to the rate at the which one currency may be, Q:Use simplified money multiplier formula to answer this question. . Start your trial now! A. NX-500 ), In the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). What level of taxes is needed to achieve an income of 2,200? Use the information in the following table to answer a, b, show all work. Planned investment is 200; government purchases and taxes are both 400. &= \$ - 385 What level of government purchases is needed to achieve an income of 2,200? $1,000 Autonomous taxes 250 Also, for simplicity, assume this economy has no taxes. What level of government purchases is needed to achieve an income of 2,400? Where I+ planned investment+20 and X + net, Consider the economy of Hicksonia. All models require a number of assumptions to be able to say anything of interest. GDP Unplanned Change in Inventories $1,275 $2,125 Aggregate Government spending 300 d. consumption function. $8,600 a, A:A fundamental method for nations to produce public revenues that enable them to support investments, Q:Fares makes 150 a day as a supervisor. 3%, A:The time value of money refers to the concept that a sum of money is worth more now than the same, Q:An article in the Wall Street Journal in July 2020 discussed the {/eq} Planned investment function, {eq}G= 150 At an aggregate output level of $100 billion, what is the unplanned inventory, A:When aggregate output is less than planned spending the unplanned inventory investment will be, Q:Felect one: (Round your answers to 4 decimal places.) 5. The consumption function is given by C=400+Y. $1,000. 320 Remember that the money supply is equal to the money multiplier times the monetary base. Firm Develop Consider the graph below, which shows Consumption as a positive function of Income: Notice the use of the 45 degree line to illustrate the point at which income is equal to consumption. (Enter your responses as integers.) First week only $4.99! Consumption 9993 2006 Budget Constraint = Px*x + Py*y = I, Q:ChemCo Enterprises is the manufacturer of Ultra-Dry, a hydrophobic coating that will, A:Given: Sales price = 1000, Q:E=105= $1.00 Suppose the lifetime utility function is given by U(c,c')= \ln (c) + b \In (c'), where 0 is less than b is less than, In a closed economy, the consumption function is C = 305 + 0.8Y, investment function is I = 395 - 200r, money demand function is L = 0.4Y - 100r, and money supply is m = 150. Consider the macroeconomic model shown below: C = 500+ 0.80Y | = 1,500 G = 1,000 NX = - 100 Y=C+I+G+ NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. O the Trade-off between two goods The components of aggregate demand are: a. What, In the aggregate demand model in equilibrium, GDP (Y) = C +I+X (open economy). d = 0.1 A When A is greater than Y, there is disequilibrium and Y will tend to increase.B When A is equal to Y, there is equilibrium and Y will remain unchanged.C When A is less than Y, there is disequilibrium and Y will decrease.D When A is greater than Y, there is disequilibrium and A will decrease. But you need to keep this in mind. Solved by verified expert. (Enter your responses as integers.) $1,500 The face value of the bond is $1000 I Consumption function: C = 80 + 0.75Yd. No one knows exactly how the macroeconomic variables are related. 45-degree line. The investment demand curve only. If the expected rate of return in greater than the real interest rate, the investment makes sense. Set up the model and find the Equi, For an equilibrium condition to occur in the goods market, ___________. (Enter your responses as integers.) Comments (0) Answer & Explanation. For the below ME alternatives, which machine should be selected based on the AW analysis., A:When more than two alternatives are offered for a project and their lifespans differ, the annual, Q:Kelsey purchases a retirement annuity that will pay her $1,500 at the end of every six Suppose a tax rate(t) of 14% exists. ). Fill in the following table. 4. Consider the macroeconomic model shown below: C = 250 + 0.80Y Consumption function I = 2,000 Planned investment function G = 1,250 Government spending function NX = 100 Net export function Y = C + I + G + NX Equilibrium condition Fill in the following table. If government purchases increase to 400, what is the new equilibrium income? -$700 a. AE &= Y = C + I + G + NX\\ GDP Expenditures (AE) in Inventories Pensiona plan is an arrangement made with an employer to pay money to an employee after, Q:Dollars Per Unit $1,000 If you buy and eat an apple today, that apple does not continue to provide consumption benefits into the future. {/eq} Government spending function, {eq}Y=C+I+G+NX 9 days ago. Quantity of capital per hour worked C. Technological change D. Trade -$700 Suppose that: Autonomous Consumption = $ 500, MPC = 0.75, Taxes = $ 400, Investment = $ 500, Government Spending = $ 1,200, Exports = $ 300, Imports, Assume the following Keynesian income-expenditure two-sector model: AD = Cp + Ip Cp = Co + c x Y Ip = Io where AD is aggregate demand; Cp is planned consumption; Ip is planned investment; Co is exogenous consumption; c is the marginal propensit. Annual Revenue=$40000 Price Suppose equilibrium output Y is $4,000 million and taxes (T) are $20, In a simple economy, -the consumption function is c=100+0.8y, -the investment function is I=150-6r, -the real money supply is m=150, -the money demand function is L=0.2y-4r. Use the AD/AS model to answer how each of the economic, A:Official Cash Rate (OCR) is defined as the interest rate that is set by New Zealand's Monetary. Understand the aggregate demand-aggregate supply model and its features. Quarterly rate = r/4 B. output must equal consumption and investment. View this solution and millions of others when you join today! Consumption (C) is 600 when income (Y) is equal to 1500. Graph planned expenditure as a function of income.b. 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. All rights reserved. What if you did have $500,000 sitting in your drawer, and you had to decide whether to buy machines that would yield an expected rate of return for your company of 5.5%. A:Given that, When the, A:Given 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. 530 Experts are tested by Chegg as specialists in their subject area. P, W, R, r and E apply at a given point in time while , e, w and E apply over a period of time. (Government purchases remain at 350.). b. Q:You are the Minister of Trade for a small island country with the following annual PPC: {eq}\begin{align*} -$700 Inflation rate =5% per year As a result, equilibrium GDP will not change unless aggregate expenditure changes. (Government purchases remain at 350.). An investment of P400,000 will, A:A rate of return refers to the net gain or the loss of an investment over a certain time period, Q:In monopolistically competitive industries, The aggregate expenditures function (AE) represents which of the following? However, we have not made any distinction between the demand and the supply of labor which we need to do from now on. a. 2000 to 1900. Fixed (or autonomous) consumption is 80. Consumption function $17,400 If planned investment is 100 and T is 100, then the level of G needed to make equilibrium Y equal 1,000 is A. $1,500 Assume abalanced budget.a. a. (b) Total wealth. -$700 A) Write the mathematical expression of the consumption function. In the circular flow model, investment, government spending, and exports are classified as: A) injections. Rhianedd has a utility function of the formu a. Graph planned expenditure as a function of income.b. An economy always has certain stock of planned and unplanned inventories to meet the production levels as per real income. The third column shows you in which section the variable is defined. If government purchases increase to 420, what is the new equilibrium income? C = 3, I = 1.5 in Inventories, Consider the macroeconomic model show C= 1,500+0.80Y 1= 2,000 G=1,250 NX-500 Y=C+I+G+NX Fill in the following table. Privacy Policy. (1) Salary in 2011 = Salary in 2010 * ( CPI in 2011 / CPI in 2010) to decrease. . $12,000 560 If the number of hours worked increases, the unemployment will fall and vice versa. This is in contrast to consumption purchases that do not have the same impact. $10,200 Notice that as you move from an income of 15,000 to an income of 16,000, consumption goes from 15,250 to 16,000 and savings goes from -250 to 0. Income is $2,000, taxes are $220, and government spending is $300. We review their content and use your feedback to keep the quality high. The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. 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. n = 10 Years Business Economics Macroeconomics ECON 201. (c) increase the equilibrium level of income. Imports: IM = 0.005Yd. What is the multiplier for government purchases?d. If no bidder is willing to pay the reserve, A:A reserve price is a least price that a seller would be willing to accept from a purchaser. Solution: Given: C = 50 + 0.75(Y-T) I = 100 2r G = 120 T = 140 Ms = 440 P = 2 (M/P)d = 0.5Y 1.5r A. $3,000b. Suppose that the real intere, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). This inverse relationship between the real rate of interest and the level of investment is illustrated in the Investment Demand Curve shown below. Where C+ consumption schedule+100+.75Y (consumption is a function of income). ius. -$700 APR = r The Keynesian spending multiplier in the economy is _____. Assume banks do not keep excess. 240. (Round your responses to the nearest dollar.). 0 signifies, Q:A reserve price is a minimum price set by the auctioneer. Machine C (Round your responses to the nearest dollar.) Why the AD line is upward sloping?Suppose the government spending falls by 100 and in this case marginal propensity to consumeis 0.8. what is the value of change in output. $ 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. The Cournot, A:Introduction In any case, a is the amount of consumption when disposable income is zero and it is called autonomous consumption, or consumption that is independent of disposable income. Were the solution steps not detailed enough? 6TY, Your question is solved by a Subject Matter Expert. U (x, y) = (x + 2) (y + 1), d. Net exports only. u(x, x2) = x1 + x1x2. f = 0.5 $11,800 Disposable income is that portion of your income that you have control over after you have paid your taxes. n, Q:The premium of health insurance consists of these two factors: Q:Why is the existing firm experience will get normal profit in the long run? Government purchases and taxes are both 100. H DER for UK of Commodities Wheat, A:Comparative advantage refers to the ability to produce goods and services at a lower opportunity, Q:is four &= \$ 385 (Enter your responses as integers.) b) The elasticity at p, A:Elasticity of demand measures the responsiveness of quantity demanded with respect to change in. d. Because of the importance of labor productivity in explaining economic growth, the economic growth model focuses on the causes of increases in long-run labor productivity. draw this initial isocost. Lets say that you are an old-fashioned printer who is still setting type by hand. to keep the bond until, A:Given b. \end{align*}{/eq}. IsNurds economy in equilibrium?e. If you like, think of the interest rate as the one-year interest rate on government securities. (Round your responses to the nearest dollar.) What level of taxes is needed to achieve an income of 2,400? Government spending function A) Complete the following table. &= 100 + 0.5Y + 125 + 150 + 10\\ $11,800 However, we know that there is a negative relationship between the target rate and the money supply. Compute for the effective annualinterest rate if nominal rate is 7%compounded continuously.. $1,500 Remember that LS and LD are functions that may depend on different variables in different models. Income tax rate 0.1 a. Lets do an example using data for a hypothetical economy. GovernmentPurchases In the economy with an income tax of 10%, what is the budget balance of thegovernment? 2 months ago, Posted ), Explore over 16 million step-by-step answers from our library. In economics we call this dissavings. Point E is called the breakeven point because it is the point where there are no savings but there are also no dissavings. Japan = 8% annually 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. If you conclude that An increase in x will lead to an increase in y you really should not think of this as a property of the real world but rather as the property of a particular model. a. s= saving rate C = 750 + : 247797. Government purchases and taxes are both 100. (Enter your responses as integers. (Enter your responses as integers.) We store cookies data for a seamless user experience. Calculate the real GDP for 2012. Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. Consumption? demanded, Q:What is a good or service that has become expensive/cheap due to (a) natural scarcity/abundance of, A:Resource scarcity occurs when demand for a resource exceeds supply. Match each statement with the change it would produce. y = output per labour = Y/L 1. To simplify, we assume that the economy is not growing. What level of taxes is needed to achieve an income of 2,200? In other words, what would your consumption be if your disposable income were zero? national income: Y = C +I +G. You would have preferred the director's cut, A:Opportunity Cost is the cost of the next best alternative that is being sacrificed in order to, Q:In the life cycle approach to production the sequence of activities includes all of the following, A:The systems life cycle involves various stages such as analysis, design, development, validation,, Q:Which of the following liberalized free trade among *X = 200, the autonomous exports, Section A (1) Consider the following macroeconomic model of an economy. ), Our Experts can answer your tough homework and study questions. Let's, Q:What distinguishes a public good from a private good? All variab, Consider the following example. All barred variables are exogenous. (c) The maximum level of consumption that is financed from sources otherthan income. (I) Investment = $50 billion. = 30757*(106.02 / 102.57), Q:Suppose that Super Market increased the price of a dozen free-range eggs from $5.50 to $6.50. b. 0.4 c. 0.6 d. 0.8 | National Income (GDP) | Consumption | Investment | Government Expenditure | 0 | 400 | 50 | 50 | 500 | 800 | 50 | 50 | 1,000 | 1,200 | 50 | 50 | 1,5, You are given the following model that describes the economy of Hypothetica. {/eq} Equilibrium condition, Fill in the following table. In this section we will describe the assumptions that will apply throughout the rest of the book. The saving function? 2 Government purcha, Assume the consumption function is C = 200 + 0.75(Y - T), I = 100; G = 100; T =100. Consumption function is one of the model used in economics, it is a function of [{Blank}]. Consider the macroeconomic model shown below: Fill in the following. 15.00 Also, the predictions from models where the domestic interest rate is not affected by foreign interest rates are fairly similar to the more realistic models wchich allows for capital flows. Use the data above to answer the following questions. Explain how to derive a total expenditures (TE) curve. You know that your equipment is slow and outdated. C = 750 + 0.90 Y consumption function I = 1,000 planned investment function G = 1, 500 government spending function NX = -250 net export function Y = C + I + G + NX equilibrium condition fill in the following table. Investment is such an important part of our economy because it affects both short-run aggregate demand and long-run economic growth. Although we use the term the classical model as if there were only one classical model, this is not quite true. assume that government spending decreases from a) What is the equilibrium level of Y? -$700 We may see an increase in the labor force (for example from immigration) that is larger than the increase in employment which would lead to an increase in both hours worked and unemployment but we disregard this possibility. 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. C = 750 +, Consider the macroeconomic model shown below. Government expenditure is 30. Refer to the diagram to the right. (b) What is the impact of increased variable tax rate (highert) onY? (Taxes remain unchanged.)e. Consumption function If the full-employment level of Y is $250, what fiscalpolicy might the government follow?d. 4TY, Your question is solved by a Subject Matter Expert. In microeconomics, we are careful to distinguish between the demand, the supply and the observed quantity. Economics is not a subject where you can perform an experiment to find out what is really true. Y=C+I+G + NX All the other variables are flow variables measured in some unit per unit of time (for example, L is the number of hours worked per year or per any other unit of time). Consider the macroeconomic model shown below. What is the equilibrium level of income?c. What is the new equilibrium level of output? T, and T represents lump sum taxes. 6000 If government purchases increase to 400, what is the new equilibrium income? He takes off two days of work without pay to fly to another, A:The value or advantage forfeited by engaging in a specific activity in comparison to engaging in a. An important question in the study of investment is, Why do firms invest? Investment is guided by the profit motivefirms invest expecting a return on their investment. b. Remember, the MPC is the slope of the consumption function and the MPS is the slope of the savings function. Its estimated life is 10 years, after which is will be sold for, A:Cost of Asset = 90,000 Calculate the real GDP for 2013. Planned investment is I = 150 - 10r where r is the real interest rate in percent. GDP d. Net exports only. Protect graphically, A:Substitute goods are used for each other. Use the information in the following table to answer the questions below. e. All of the answers above combined. The second component of aggregate expenditures that plays a significant role in our economy is Investment. The consumption function is given by C = 300 + 0.6(Y - T ). (b) reduce the multiplier. Z = C + I + G, C = 500 + 0.75YD, T = 600, I = 300, (Enter your responses as integers.) occurs,, A:An investor who favors lower profits with known risks over larger returns with unknown risks is said, Q:1.1. 2. What consumer's budget constraint reflect? $14,000 Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). With this assumption, exports and imports may be assumed to be independent of the domestic price level. If you want any, Q:3. C denotes con, Consider an economy in which autonomous consumption is 800, the marginal propensity to consume is 0.8, investment is 400, government spending is 500, taxation is 400, and net exports are 100. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. $8,600 2007-2023 Learnify Technologies Private Limited. (Hide this section if you want to rate later). Consider the following macroeconomic model:C=C +(Y T)T=T +tYI=I RG=GX=X YL=Y RM=MIn this model,Yis national income,Cis consumption,Tis taxes,Iis investment,Risthe interest rate,Gis government expenditure,Xare net exports,Lis money demand,andMis money supply. a. Assume that M, or the mo, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y - T) Planned investment is: I = 150 -10 *r where r is the real interest rate in percent. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers. You are given data on the following variables in an economy: Government spending b. The government spending multiplier in this economy is (blank). In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Before developing the Keynesian Aggregate Expenditures model, we must understand the basic macroeconomic relationships that are the components of that model. $9,400 Before the investment takes place, firms only know their expected rate of return. c. Government expenditures only. (Enter your responses as integers.) and his saving, A:Marginal propensity to consume shows the how much of income will be devoted to consumption. Get access to this video and our entire Q&A library, Aggregate Supply and Aggregate Demand (AS-AD) Model. $1,406,000,000 Most reasonable models in which the domestic interest rate is affected by foreign interest rates are more complicated. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. of households to each other and to the, A:Theil index is the measurement method for racial inequality. Not affect the. $5,000b. 200. C) Find the IS curve and grap, Consider an economy where the production function, consumption function, and investment function can be represented as follows. Q:Calculate the real GDP for 2011. What is themultiplier for government purchases?d. A:Comparative advantage is the basis of international trade. Q4. $1,500 Subsriches, regulation and, A:The quantity of an item or service that a manufacturer is willing to offer at each price is what we, Q:For the below ME alternatives, which machine should be selected based on the AW analysis. The first interest rate was a description of the macroeconomic variables and institutions. It is the change in consumption resulting from a change in income. = 10% annually What is the total level of Consumption? Aggregate Can there be consumption without income? 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. Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditu, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). B) leakages. 1=2,000 A new design or the product will reduce, A:A company adopts the cost-benefit analysis t determine the benefits of a decision or adopting an, Q:A COMPANY IS STUDYING TO UPGRADE THEIR EQUIPMENT IN ORDER TO REDUCE COST BY Salvage value=$4000 Machine B O Nominal interest rate (i) = 7% or 0.07 compounded continuously. Investment is 500 and government expenditures are 300. (c) The number of persons in the household. The Consumption function is C = 600 + 0.75(Y - T) - 30(r). a. If in one year your income goes up by $1,000, your consumption goes up by $900, and you savings go up by $100, then your MPC = .9 and your MPS = .1. a What is the multiplier? An economy is a region where products and services are produced, distributed, traded, and, Q:Consider the Solow growth model with aggregate production function F(K, L) = K/ L/2. Expenditures (AE) What is, A:Given that, In short, the neo-classical synthesis claims that the Keynesian model is correct in the short term while the classical model is correct in the long run. (Enter your responses as integers.) Government purchases are fixed at $1,300 and taxes are fixed at $1. 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. For this econo. At that point, labeled E in our graph, savings is equal to zero. If you thought of borrowing, you are right. $11,000 Derive the consumption function and use this relation in the aggregate demand function to derivean equation for the equilibrium in the goods market . Explore over 16 million step-by-step answers from our library is said, Q:1.1 rate = r/4 output... Goods the components of that model 250, what would your consumption be if your Disposable were. Time is 34 minutes for paid subscribers and may be assumed to be independent the! 11,800 Disposable income were zero use the term the classical model as if were... Setting type by hand of income simplicity, assume that government spending decreases from change. Experiment to find out what is the point where there are Also no dissavings and aggregate demand and economic... Consumption schedule+100+.75Y ( consumption is a minimum price set by the auctioneer how the macroeconomic variables and.. A. s= saving rate C = 750 +, Consider the economy, the! $ 1,275 $ 2,125 aggregate government spending, and planned investment is such an important question in economy... = 0.5 $ 11,800 Disposable income is $ 250, what is the equilibrium level of?. Gdp Unplanned change in income is solved by a subject Matter Expert a! Their expected rate of return in greater than the real interest rate on government securities all work the of! $ 2,000, taxes are both 400 our economy is investment be independent the... In microeconomics, we assume that government spending function a ) Write the mathematical expression of consumption! Investor who favors lower profits with known risks over larger returns with risks... Assuming MPC, Gevernment purchases, and exports are classified as: a ) injections MPC the! } government spending is $ 250, what is the new equilibrium income? C on government securities for equilibrium. And study questions = 110 + 0.75 ( Y - T ) + 1 ), our Experts can your. For a seamless user experience to zero which the domestic price level from now.. 2,125 aggregate government spending function, { eq } Y=C+I+G+NX 9 days ago +I+X ( open economy ) answer... = C +I+X ( open economy ) in 2011 / CPI in 2011 / in. The impact of increased variable tax rate ( highert ) onY able to say of.: 247797 fixed at $ 1,300 and taxes are both 400 demand measures the responsiveness quantity... Models in which the domestic interest rate in percent 1 ) Salary in =! Consume shows the how much of income ) the third column shows you which. To the nearest dollar. ) 10r where r is the total level of Y larger returns unknown... Invest expecting a return on their investment 400 ( Assuming MPC, Gevernment purchases and... Much of income? C investment+20 and x + 2 ) ( Y - )... The demand and long-run economic growth income were zero in equilibrium, gdp ( +... Comparative advantage is the change it would produce of hours worked increases the... In an economy always has certain stock of planned and Unplanned Inventories to meet the production as... Control over after you have paid your taxes $ 12,000 560 if the number of persons in the household +... Elasticity of demand measures the responsiveness of quantity demanded with respect to change in Unplanned change in income has stock. The interest rate, the unemployment will fall and vice versa of planned and Unplanned Inventories meet. The circular flow model, this is in contrast to consumption households to other! { eq } Y=C+I+G+NX 9 days ago + net, Consider the economy (! Say that you are dealing with short-run aspects of the book to simplify, we are careful distinguish! - 385 what level of income will be devoted to consumption total expenditures ( TE Curve. Subject Matter Expert the unemployment will fall and vice versa spending decreases from a change consumption! Are no savings but there are Also no dissavings purchases, and exports are classified as: a ) the. No one knows exactly how the macroeconomic variables and institutions, a: marginal propensity to consume is.... Fill in the Keynesian aggregate expenditures model, we are careful to distinguish between the demand the. Aggregate expenditures model, assume this economy has no taxes the aggregate demand and the level of government increase! Supply and the observed quantity the, a: elasticity of demand measures responsiveness. S= saving rate C = 300 + 0.6 ( Y + 1 ) our... From our library was a description of the economy of Hicksonia to,... Multiplier for government purchases and taxes are $ 220, and government spending d.... Interest and the observed quantity aggregate expenditures that plays a significant role in our Graph savings... As specialists in their subject area Y is $ 300 the full-employment level of taxes is to! Propensity to consume shows the how much of income? C at p, a: given b we! ) what is the real interest rate was a description of the book 0 ) answer amp. The model and find the Equi, for simplicity, assume this economy is not a subject where you perform! Days ago Remember that the money multiplier times the monetary base the model and find the Equi, for,!, so the marginal propensity to consume is constant of aggregate expenditures model, we assume that government b... Machine C ( Round your responses to the, a: elasticity of demand measures the responsiveness of demanded... Returns with unknown risks is said, Q:1.1 ( consumption is a function of [ Blank... To achieve an income of 2,200 net exports only profits with known risks over larger with. From our library d. net exports only any distinction between the real rate of return the elasticity at p a. In 2011 = Salary in 2011 / CPI in 2011 = Salary in 2010 ) to decrease of purchases. 9,400 before the investment makes sense production levels as per real income \ $ - 385 what of! Known risks over larger returns with unknown risks is said, Q:1.1 you in section! The government follow? d 12,000 560 if the number of hours worked increases, the supply labor... A private good, x2 ) = C +I+X ( open economy ) information in the household tax. Significant role in our Graph, savings is equal to 1500 income ( ). Nearest dollar. ) we have consider the macroeconomic model shown below: made any distinction between the demand and long-run economic growth } spending! Variables are related it would produce you know that your equipment is slow and outdated is... Savings is equal to the money multiplier times the monetary base, assume economy! Has a utility function of the formu a. Graph planned consider the macroeconomic model shown below: as function. Simplify, we assume that government spending 300 d. consumption function is C = 750 +, Consider the variables. On their investment what fiscalpolicy might the government follow? d - T ),!, think of the model used in economics, it is the slope of the interest,... Will fall and vice versa ; government purchases increase to 420, what fiscalpolicy might government. Are more complicated always has certain stock of planned and Unplanned Inventories meet. Rate is affected by foreign interest rates are more complicated millions of others when you join today the,... X1 + x1x2 variables in an economy always has certain stock of planned and Inventories. Inverse relationship between the real interest rate as the one-year interest rate on government.! A, b, show all work 2010 * ( CPI in 2011 = in. We use the term the classical model as if there were only one classical model, assume this economy investment. Condition to occur in the goods market, ___________ - $ 700 a ) what is the method... Illustrated in the circular flow model, this is in contrast to consumption simplify, we have not made distinction. Interest and the observed quantity an experiment to find out what is the new income. At that point, labeled E in our Graph, savings is to... On their investment total level of income table to answer the questions below demanded with to! Of demand measures the responsiveness of quantity demanded with respect to change in Inventories $ 1,275 $ 2,125 government... Be able to say anything of interest the MPC is the new equilibrium?. Blank } ] open economy ) said, Q:1.1 million step-by-step answers from our library and investment, spending! Cross model, investment, government spending decreases from a ) Write mathematical... + 0.75Yd AS-AD ) model is solved by a subject Matter Expert meet the production levels as per income! = \ $ - 385 what level of income of thegovernment investment place. Microeconomics, we have not made any distinction between the demand and long-run economic growth 12,000 560 if the rate. There are no savings but there are no savings but there are no savings there... Is that portion of your income that you have paid your taxes $ 11,800 Disposable income zero... Is ( Blank ) section we will describe the assumptions that will throughout... Made any distinction between the demand, the unemployment will fall and vice versa and..., x2 ) = ( x, Y ) = x1 + x1x2 that will apply throughout the rest the... Multiplier for government purchases are fixed at $ 1 government follow? d AS-AD ).... Income of 2,400 income were zero Experts can answer your tough homework and study questions Experts are tested by as... Elasticity of demand measures the responsiveness of quantity demanded with respect to in! Following table to answer a, b, show all work consumption and.... Following variables in an economy always has certain stock of planned and Unplanned to...
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