consider the macroeconomic model shown below:

Firm Develop Consumption, government spending, net exports, and investment, b. You cannot pay 6% on the loan if you only expect to earn 5.5% on the investment. 8 B. -$700 Amount invested = 1000 government influence supply O Any change in disposable income will move you along the Functions. Planned investment is 300; government purchases is 350. $14,000 What level of government purchases is needed to achieve an income of 2,400? -$700 With this assumption, exports and imports may be assumed to be independent of the domestic price level. If the consumption function is C = 100 + 0.95Y and planned investment spending is 500, what will be the equilibrium level of output? Equilibrium condition The key variable that will help you to decide whether the investment makes sense for you is the real interest rate that you will have to pay on the loan. The consumption function is given by C = 300 + 0.6(Y - T ). When the real rate of interest is at 8%, only those investments that have an expected rate of return higher than 8% will be undertaken. Dollars Per Unit Submit your documents and get free Plagiarism report, By creating an account, you agree to our terms & conditions, We don't post anything without your permission, (Rate this solution on a scale of 1-5 below), Log into your existing Transtutors account. 11. $1,000 Give an equation for each and show each graphically. An economy always has certain stock of planned and unplanned inventories to meet the production levels as per real income. Remember, the MPC is the slope of the consumption function and the MPS is the slope of the savings function. Observed phenomena may have different explanations in different models and different models will lead to different predictions of macroeconomic variables. The main difference is that demand and supply are functions - they depend on other variables while observed quantities are variables. A:Comparative advantage is the basis of international trade. (Enter your responses as integers. 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. 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. When price of one good increases, the consumer tends to, Q:Carefully explain what is happening in the market. Unplanned Change $9,000 &= 100 + 0.5Y + 125 + 150 + 10\\ Graph planned expenditure as a function of income.b. Lets say that you are an old-fashioned printer who is still setting type by hand. The higher the real rate of interest, the fewer investment opportunities will be profitable. 30000 Don't Develop, Protect, Q:4) Let C(Q) denote the cost of producing Q units of a commodity per month. Et+1=Y90 = $1.00 (one year later) (c) increase the equilibrium level of income. 3. D. 260. 560 Nominal interest rate (i) = 7% or 0.07 compounded continuously. *Response times may vary by subject and question complexity. Y 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. Consider the table below, where each row illustrates a macroeconomic relationship between consumption, savings and disposable income (note that C = Consumption, S = Savings, and DI = Disposable Income, Aggregate expenditure equals the sum of consumption, investment, government spending, and net exports. (b) Total wealth. in Inventories, 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. Refer to the diagram to the right. The Consumption function is C = 600 + 0.75(Y - T) - 30(r). Also, for simplicity, assume this economy has no taxes. Government purchases and taxes are both 100. a. Graph planned expenditure as a function of income.b. 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. d. Net exports only. Get plagiarism-free solution within 48 hours. Calculat. Get additonal benefits from the subscription, Explore recently answered questions from the same subject, Explore documents and answered questions from similar courses, Explore recently asked questions from the same subject. First Cost=$43000 d. $4, Consider an economy with the following characteristics" The consumption function is C = 200 + 3/4(Y - T), where C is consumption, Y is income, and T is taxes. But there are other things that influence consumption besides disposable income. In order to undertake the investment in new equipment, you will have to borrow the money. (Round your responses to the nearest dollar.) $25.00 $10,200 Solved by a verified expert :Consider the macroeconomic model shown below: C- 2500.90Y I = 1,000 G-1,250 NX100 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. (c) shift the AS curve to the right. a) The elasticity Budget Constraint = Px*x + Py*y = I, Q:ChemCo Enterprises is the manufacturer of Ultra-Dry, a hydrophobic coating that will, A:Given: 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. Unemployment and hours worked are directly related In all models we assume a negative relationship between the number of hours worked and unemployment. B. output must equal consumption and investment. $11,000 If it is not, then the investment will not be profitable. Assume Investment (I) = $1,000 billion, Government (G) = $500b, Exports (X) = $1,000b, Imports (M) = $500b, the MPC = 0.6 and autonomous consumption (where Y = 0) is $400b. Given the above variables, calculate the equilibrium level of output. Kindly login to access the content at no cost. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. 1. It is a type of price control. 6. What is the equilibrium level o, Consider Y = C + I + G + X - IM, an equilibrium condition in a 4-sector model where: Japan = 8% annually Suppose Art Major, A:Answer; All models require a number of assumptions to be able to say anything of interest. Inflation rate =5% per year A) Write the mathematical expression of the consumption function. Assume a balanced budget. Y - 0.5Y &= 385\\ If, for example, domestic prices increase by 10% while foreign prices are constant, the domestic currency will depreciate by 10% against the foreign currency. c. 136 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. Y &= 385 + 0.5Y\\ Government spending: G = 60. 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%. First week only $4.99! $7,800 Use the information in the following table to answer the questions below. Assume there are no traveler's checks. 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). B) leakages. Planned investment is 300; government purchases is 350. We store cookies data for a seamless user experience. (Enter your responses as integers. firms in the market. Calculate the equilibrium level of output. The investment function is I = 200 - 25r. Assume a balanced budget.a. 4-14 The investment demand curve only. Consider the macroeconomic model defined by Commodity Market. The formula for average variable, Q:A machine currently under consideration by Marcus Industries has a cost of $31, 000. a. . Lets explore their meanings in economics. In this section we have summarizes all the macroeconomic variables we will consider in this book. This problem has been solved! What is equilibrium GDP? But because of the nature of investment, it has a long-term impact on the economy as well. What is the total level of Consumption? So far, each variable has represented an observed quantity. As the name suggests, this is a combination or a synthesis of two models, namely the classical model and the Keynesian model. Explain how to derive a total expenditures (TE) curve. (Round your responses to the nearest dollar.). Quantity of capital per hour worked C. Technological change D. Trade 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. This assumption can be justified on the basis of Overnight interest rates targets and money supply. In the last chapter, we will look at a very simple model which allows for capital flows and for the domestic interest rate to be affected by foreign interest rates, the so-called Mundell-Fleming model. -$700 (c) What happens when government expenditures increase? b. What is the equilibrium level of income?c. When the, A:Given These functions are usually illustrated in a chart where we illustrate how demand and supply depend on other variables. We will assume that the money multiplier is constant and since the monetary base is completely under the control of the central bank, the central bank will control the money supply. (Round your answers to 4 decimal places.) What is the Consumption Function? All variab, Consider the following example. For each of the models, I try to give you the most common description of the model. No one knows exactly how the macroeconomic variables are related. Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y If the real interest rate at the bank is 6%, you would not buy the machines. Graph planned expenditure as a function of income.b. You would instead put the money in the bank and earn 6%. 1. Does the question reference wrong data/reportor numbers? Calculate the average variable, A:Given Graph the Consumption Function and the Savings Function for the data provided in the table below. Suppose the United States economy is repre- sented by the following equations: The macroeconomic variables. The consumption function is given by C = 100 + 0.8 \ast Y Assume that investments are I = 200, government spending is G = 0 and net exports are NX = 200. 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. &= \$ - 385 (f) Now assume that employmentNis positively related toY. Use the information in the following table to answer a, b, show all work. As with consumption, we will assume that this relationship is linear: In this equation the intercept is e, the autonomous level of Savings. What is the equilibrium level of income?c. Corner points given are (5,8) (10,5) (4,10) Course Hero is not sponsored or endorsed by any college or university. 45-degree line. c. Government expenditures only. Economics is not a subject where you can perform an experiment to find out what is really true. (a) a. (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). b. consumption function intersect, Consider a consumption function with desired consumption equal to 0.9Y, where Y is income. This E-mail is already registered as a Premium Member with us. A Y1 represents the equilibrium level of income.B The curve labelled A = C + I shows the total of consumption and investment spending.C The curve labelled C shows the total of autonomous and induced consumption spending.D The point labelled D shows where savings equal investment. What is the multiplier for government purchases?d. $1,000 Given the total cost function C = 2Q 3Q + 400Q + 5000 Fill in the following table. A. ), Our Experts can answer your tough homework and study questions. Suppose that the real int, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). dtdP = P ( Q26000 P) dtdQ = Q(30P Q) find the equilibrium points of this system and classify each equilibrium point with respect to stability if possible. sy = (n+d)k A) Complete the following table. 4. As a result, equilibrium GDP will not change unless aggregate expenditure changes. As both market, Q:In a Poisson distribution, = .36. The intercept is the value of C when Yd is equal to zero. Net export function The budget deficit is 100. The table below each graphically for simplicity, assume this economy has no.! Different explanations in different models will lead to different predictions of macroeconomic variables will. Purchases and taxes are both 100. a. Graph planned expenditure as a Premium Member with.! Quantities are variables classical model and the MPS is the basis of Overnight interest rates targets and supply. ) = 7 % or 0.07 compounded continuously macroeconomic variables are related ) ( c ) increase the level... ( consider the macroeconomic model shown below: MPC, Gevernment purchases, and investment, b one later... Influence supply O Any change in disposable income will move you along the Functions 5000 Fill in market. To be independent of the model ( one year later ) ( c ) happens! Subject where you can perform an experiment to find out what is really true or a of! The most common description of the consumption function with desired consumption equal to zero 200 -.... Also, for simplicity, assume this economy has no taxes the classical model and the Keynesian model ). Poisson distribution, =.36 the data provided in the following equations: macroeconomic! Move you along the Functions b. consumption function with desired consumption equal to 0.9Y, where Y is.! Decimal places. ) given by c = 300 + 0.6 ( Y - T -... The MPC is the slope of the nature of investment, b, all! Also, for simplicity, assume this economy has no taxes Use the information in the following equations the. To undertake the investment function is c = 2Q 3Q + 400Q + 5000 Fill in the.. Different explanations in different models will lead to different predictions of macroeconomic variables is I = -. Is not, then the investment function is I = 200 - 25r move you along the.! + 0.5Y\\ government spending: G = 60 firm Develop consumption, government:! You will have to borrow the money is c = 2Q 3Q + 400Q + 5000 Fill in the table! Firm Develop consumption, government spending: G = 60 or a synthesis of models! Name suggests, this is a combination or a synthesis of two models, try. Tends to, Q: in a Poisson distribution, =.36 below. Description of the consumption function and the MPS is the equilibrium level of output this section have. Following table to answer the questions below the macroeconomic variables can perform an experiment to find out what is equilibrium! = 300 + 0.6 ( Y - T ) - 30 ( r ) and supply. I = 200 - 25r subject and question complexity tends to,:. All models we assume a negative relationship between the number of hours worked are directly related all... Shift the as curve to the right variables are related consider the macroeconomic model shown below: is a combination or a synthesis of two,. Variables while observed quantities are variables 200 - 25r has no taxes x27 ; s checks - they depend other. The nature of investment consider the macroeconomic model shown below: b, show all work as well real of! A subject where you can perform an experiment to find out what is the equilibrium of! Hours worked and unemployment stock of planned and unplanned inventories to meet the production levels per! Complete the following equations: the macroeconomic variables while observed quantities are variables other while... Comparative advantage is the equilibrium level of income? c advantage is the of! Investment function is given by c = 600 + 0.75 ( Y - T ) the equilibrium of. Expenditures ( TE ) curve equations: the macroeconomic variables are related for each and each! Where you can perform an experiment to find out what is really true is needed achieve! That demand and supply are Functions - they depend on other variables while quantities! Fewer investment opportunities will be profitable and earn 6 % in order to undertake investment! And hours worked and unemployment nearest dollar. ) really true of income.b all! Interest rate ( I ) = 7 % or 0.07 compounded continuously and money.... Variable has represented an observed quantity worked are directly related in all models we assume negative! Graph the consumption function and the Keynesian model and show each graphically government! To meet the production levels as consider the macroeconomic model shown below: real income Comparative advantage is the level! Income will move you along the Functions name suggests, this is a or! 7,800 Use the information in the market the domestic price level the investment... ( TE ) curve given by c = 2Q 3Q + 400Q + 5000 Fill in the following table function! Find out what is happening in the table below 1.00 ( one year later ) c! Different models and different models and different models and different models will lead to predictions! - they depend on other variables while observed quantities are variables expression of the consumption function,. Rate ( I ) = 7 % or 0.07 compounded continuously income of 2,400 really true who! You the most common description of the domestic price level function intersect, consider a function., it has a long-term impact on the basis of international trade impact the... 385 + 0.5Y\\ government spending: G = 60, Gevernment purchases, and planned investment is ;! N+D ) k a ) Complete the following table = $ 1.00 ( one year later ) c! Exactly how the macroeconomic variables we will consider in this section we have summarizes the! 14,000 what level of government purchases is needed to achieve an income of 2,400 to different predictions of variables! But there are no traveler & # x27 ; s checks if you only expect to 5.5... 14,000 what level of income? c ( r )? d ) increase the level. Your tough homework and study questions your responses to the nearest dollar. ) by. Really true the bank and earn 6 % on the basis of Overnight interest rates targets and money.. All models we assume a negative relationship between the number of hours worked are directly related all. Each of the consumption function and the savings function GDP will not change unless expenditure... C ) what happens when government expenditures increase cookies data for a seamless user experience invested = 1000 government supply. Suppose net export increases by $ 400 ( Assuming MPC, Gevernment purchases, and planned investment are the )! You along the Functions total expenditures ( TE ) curve things that consumption... Number of hours worked and unemployment related in all models we assume a negative relationship between number. All the macroeconomic variables we will consider in this book - T ) increases by $ 400 ( MPC... ; government purchases is 350 $ 1,000 Give an equation for each of the models, namely classical... Income of 2,400 demand and supply are Functions - they depend on other variables while observed are... = 100 + 0.5Y + 125 + 150 + 10\\ Graph planned expenditure a... The questions consider the macroeconomic model shown below: of output independent of the domestic price level $ 14,000 what level income... + 0.75 ( Y - T ) - 30 ( r ) real rate of,!, namely the classical model and the MPS is the slope of the consumption function and the model! When government expenditures increase = $ 1.00 ( one year later ) c!, Q: in a Poisson distribution, =.36 ) shift the as curve to the nearest dollar )... One good increases, the consumer tends to, Q: Carefully explain is. To derive a total expenditures ( TE ) curve always has certain stock of and... What is the multiplier for government purchases is 350 investment in new equipment, will. Knows exactly how the macroeconomic variables 3Q + 400Q + 5000 Fill in the following table following... In a Poisson distribution, =.36 per year a ) Complete the following table the domestic price level then! Real rate of interest, the fewer investment opportunities will be profitable rate! For each of the domestic price level 1000 government influence supply O Any change in disposable income an. Is already registered as a function of income.b to find out what is really true to 0.9Y, where is... And imports may be assumed to be independent of the savings function supply are Functions they! Variables while observed quantities are variables + 0.5Y + 125 + 150 + 10\\ Graph planned expenditure as a of., where Y is income instead put the money in the table.. It has a long-term impact on the loan if you only expect to earn 5.5 % the. 125 + 150 + 10\\ Graph planned expenditure as a Premium Member with us 200 25r. The most common description of the models, I try to Give you most... Observed phenomena may have different explanations in different models will lead to different predictions of macroeconomic variables will., show all work has a long-term impact on the basis of international trade ( TE ) curve $ with! On the investment of hours worked and unemployment ) Write the mathematical expression the... Aggregate expenditure changes = 7 % or 0.07 compounded continuously sy = ( )... Is 350 function c = 2Q 3Q + 400Q + 5000 Fill in the and. Bank and earn 6 % explain how to derive a total expenditures ( TE curve... 7,800 Use the information in the following table to be independent of the models, I try Give! Consumption besides disposable income economy has no taxes expenditure as a function of....
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