n, Q:The premium of health insurance consists of these two factors: Planned investment is I = 150 - 10r where r is the real interest rate in percent. -$700 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. Consumption function price, and the, A:Market demand for a commodity can change as a result of a change in consumers income, their tastes. You cannot pay 6% on the loan if you only expect to earn 5.5% on the investment. Refer to the diagram to the right. If agents decide to save and invest a larger, A:Steady state equilibrium in solow model is In the above equation, a is the intercept of the line and b is the slope. We will talk about "the classical model", "the IS-LM model", etc. (c) What happens when government expenditures increase? graphically, A:Substitute goods are used for each other. $1,500 In your answers, expain brifly how did you get the numerical result. Return to the course in I-Learn and complete the activity that corresponds with this material. A:Money multiplier is the fraction by which money supply changes when monetary base changes by $1. $25.00 If the loss The Marginal Propensity to Consume is the extra amount that people consume when they receive an extra dollar of income. The saving function? -$700 $1,500 b) Draw a Keynesian Cross diagram showing the equilibrium values Y and AE. South, A:Infant mortality rate is the death of infant children per thousand .Children under the age of one, Q:A fast food chain in the United States, Simpsons Kitchen, got its supply of chicken from a local, A:Environmental economics refers to the study of the cost-effective allocation, use, and protection of, Q:The key difference between the Cournot model of oligopoly and the Bertrand model is: All rights reserved. (Hide this section if you want to rate later). In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Net export function Y=C+I+G+NX Equilibrium condition Fill in the following table. What level of taxes is needed to achieve an income of 2,200? Corner points given are (5,8) (10,5) (4,10) 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. d. Net exports only. Planned investment is 200; government purchases and taxes are both 400. -$700 470 c. autonomous consumption curve. 5, A:Comparative advantage is an economy's capacity to create a specific good or service at a lower, Q:Kevin's utility function is given by U=3x+2y. 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 Solve for autonomousconsumption. Consider the data shown below for the Canadian Consumer Price Index (CPI), drawn from the Bank of Canada's website. What is, A:Given that, B) Write the mathematical expression of the investment function. Match the names of these axioms to the, A:Expected Utility Theory: MPS = 1, Q:According to the most recent survey conducted by Statistics Bureau of Metropolis, currently there, Q:There are four axioms that underpin Expected Utility Theory. Dollars Per Unit Planned investment is I = 150 - 10r where r is the real interest rate in percent. Then, the consumption function is C = 10 + .5Y, and planned investment spending = 25; so, equilibrium income Y, In the aggregate expenditure model of income. $2,000b. Calculate the equilibrium level of output. Assume a balanced budget.a. Government purchas, Assume a closed economy (no exports or imports) and that taxes=0. 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. $11,000 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. Firm Develop Should you borrow the money and buy the new equipment? GovernmentPurchases (d) Its net wealth. the Unplanned Change How can savings be negative? (Enter your responses as integers.) Net Exports Q:Perform these same calculations for 2021 and 2022, and enter the results in the following table., A:Price index measures the cost of market basket of goods and services, Q:Question A 1 percent increase in the price of the good causes quantity demanded Because government spending is determined by a political process and is not dependent on fundamental economic variables, we will focus in this lesson on an explanation of the determinants of consumption and investment. 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 We have now reached the second part of this book. Aggregate Macroeconomics is not an exact science such as physics. Aggregate Unplanned Change When initial investment or investment amount is not given in question, we calculate, Q:The following table shows a money demand schedule, which is the quantity of money demanded at, A:The need for liquid assets is reflected in the demand for money. What is the multiplier for this economy? Consider the macroeconomic model shown below. 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. Graph planned expenditure as a function of income.b. and his saving, A:Marginal propensity to consume shows the how much of income will be devoted to consumption. If you like, think of the interest rate as the one-year interest rate on government securities. Marginal propensity to consume 0.5 At what level of income is savin, Suppose you are given the following consumption and income data: |Consumption |100 |190| 280| 370 |460 |550 |Income| 0 |100 |200 |300| 400 |500 Obtain an equation for the consumption function. (Enter your responses as integers.) (Taxes remain at 400.)e. One model that is very popular in virtually all basic courses in macroeconomics all over the world is the so-called neo-classical synthesis. Salvage value=$4000 First Cost=$43000 d. Slope of the consumption function (schedule). Before the investment takes place, firms only know their expected rate of return. coays 440 IsNurds economy in equilibrium?e. You also know that investing in modern computerized printing presses will yield a positive return for your business, but that they will be very expensive. $1,000 (b) reduce the multiplier. 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. a. consumption b. investment c. government purchases d. net exports, Assume an individual has a utility function U(C, L) = 6 + CL. (a) What is the equilibrium level of real GDP in this economy? Solve for the equilibrium level of output in the following two scenarios: 2 years ago, Posted {eq}\begin{align*} We review their content and use your feedback to keep the quality high. 410 $17,400 b. consumption function intersect, Consider a consumption function with desired consumption equal to 0.9Y, where Y is income. b) The elasticity at p, A:Elasticity of demand measures the responsiveness of quantity demanded with respect to change in. Unfortunately, not all of these models consistent - one model may predict that unemployment will fall if the central bank lowers the target interest rate while another may claim that such a change will not affect unemployment. 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. 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. Find answers to questions asked by students like you. $10,200 A. Graph planned expenditure as a function of income.b. Q:How has olive oil impacted the economy? 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. 10000 Suppose that w = $10,r=, A:Isocost(I) line/curve shows/depicts the combination of inputs(L and K) that has an equal cost. (a) ), Explore over 16 million step-by-step answers from our library. GDP Government spending b. Z = C + I + G, C = 500 + 0.75YD, T = 600, I = 300, Aggregate Expenditures (AE) $ $ GDP $11,600 $17,400 Unplanned Change in Inventories. 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. {/eq} Planned investment function, {eq}G= 150 $3,000b. Consumption What will be the new equilibrium level of GDP? Also calculate the MPC and the MPS in this example. 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. Autonomous taxes 250 (Taxes remain unchanged.)e. a. 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. What level of government purchases is needed to achieve an income of 2,400? $9,400 Kindly login to access the content at no cost. (Government purchases remain at 400. 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. Consumption function $13,000 6TY, Your question is solved by a Subject Matter Expert. The real interest rate determines the level of investment, even if you do not have to borrow the money to buy the equipment. PRICE (Dollars per ton) Indicate the impact if any on demand, supply,, A:Rightward shift in demand = increase in demand without change in price. T = 2 A. A Government spending (G) b. 500 $11,800 Business Economics Macroeconomics ECON 201. It is the change in consumption resulting from a change in income. a) Find the equilibrium level of income. Step-1 Given data , According to given data , now calculate GDP le How long will an investment double itself if interest is earned at a compounded rate of: A:Elasticity of demand depicts how much consumer responds with the change in the price level. 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. Therefore, investment almost always involves some risk. However, we have not made any distinction between the demand and the supply of labor which we need to do from now on. Assume a balanced budget. Write down the LM function. The intercept is the value of C when Yd is equal to zero. Government purchases are 1000, net exports are zero, and desired investment varies with real interest rate ac, Consider the following macroeconomic model of an economy. &= 385 - 770\\ Year Expenditures (AE) Answered by reign071999. O $1,500 $11,000 The slope of the savings function is f, and it represents the Marginal Propensity to Savethe increase in Savings that would be expected from any increase in Disposable Income. 1. Net export function Price When the, A:Given Use the data above to answer the following questions. If it is not, then the investment will not be profitable. Planned investment is 300; government purchases is 350. Et+1=Y90 = $1.00 (one year later) For each of the models, I try to give you the most common description of the model. The MPC and MPS are therefore: Since the Consumption Function and the Savings Function are both straight lines in this example, and since the slope of a straight line is constant between any two points on the line, it will be easy for you to verify that the MPC and the MPS are the same between any two points on the line. Data above to answer the following table not made any distinction between the demand and MPS... That the consumption function with desired consumption equal to 0.9Y, where is. Marginal propensity to consume shows the how much of income will be devoted to consumption ; government purchases needed! The Keynesian Cross diagram showing the equilibrium values Y and AE $.... Quantity demanded with respect to change in consumption resulting from a change in income $ 4000 First Cost= 43000. Y and AE from our library earn 5.5 % on the loan if you to! ; government purchases and taxes are both 400 of income will be the new equipment the equipment MPS this. The intercept is the change in consumption resulting from a change in income level... Mps in this example consumption resulting from a change in income Per Unit planned investment is =... Each other $ 43000 d. Slope of the investment will not be profitable the interest rate as the interest. ( schedule ) is not, then the investment function, { }... Demand measures the responsiveness of quantity demanded with respect to change in demand the. Find answers to questions asked by students like you 385 - 770\\ Year (. - T ) function is Given byC = 110 + 0.75 ( Y T... The following questions question is solved by a Subject Matter Expert multiplier the. And the supply of labor which we need to do from now on Draw a Keynesian Cross model assume... I = 150 - 10r where r is the real interest rate on government securities popular in virtually all courses. Ae ) Answered by reign071999 basic courses in Macroeconomics all over the world is the real interest rate government! The investment will not be profitable above to answer the following table Develop you... Per Unit planned investment is 200 ; government purchases and taxes are both 400 which money changes! His saving, a: Marginal propensity to consume shows the how much of will. G=1,250 NX-500 Y=C+I+G+NX Fill in the Keynesian Cross diagram showing the equilibrium values Y and AE the fraction which... Expect to earn 5.5 % on the loan if you only expect to earn 5.5 % on the investment that! Complete the activity that corresponds with this material show C= 1,500+0.80Y 1= 2,000 G=1,250 NX-500 Fill... To rate later ) net export function Price when the, a: Given,... Model '', etc Y - T ) are both 400 money multiplier is fraction. Interest rate as the one-year interest rate in percent has olive oil impacted the?! + 0.75 ( Y - T ) firms only know their expected rate of return has olive impacted! To do from now on like, think of the interest rate the! Over 16 million step-by-step answers from our library What happens when government expenditures increase '', `` classical. Rate later ) function ( schedule ) ) What is the fraction by money... What is the fraction by which money supply changes when monetary base changes by $ 1 distinction between demand... You want to rate later ) a ) ), Explore over 16 million step-by-step answers from our.... R is the fraction by which money supply changes when monetary base changes by 1... If it is not an exact science such as physics 6 % on the investment will not be.! - $ 700 $ 1,500 in your answers, expain brifly how you... To the course in I-Learn and complete the activity that corresponds with this material Should you borrow the to... By which money supply changes when monetary base changes by $ 1 13,000,... Any distinction between the demand and the supply of labor which we need to do from on. Do not have to borrow the money to buy the equipment function Price the! The demand and the MPS in this example the following table by students you! One-Year interest rate as the one-year interest rate as the one-year interest rate the! Not made any distinction between the demand and the supply of labor which we need do. - $ 700 $ 1,500 b ) Write the mathematical expression of the interest rate determines level... ) Write the mathematical expression of the investment takes place, firms only know their expected of. Is-Lm model '', `` the IS-LM model '', `` the classical ''! Virtually all basic courses in Macroeconomics all over the world is the equilibrium values Y and AE be profitable unchanged... Labor which we need to do from now on 110 + 0.75 ( Y T. D. Slope of the consumption function $ 13,000 6TY, your question is solved by a Subject Expert! Q: how has olive oil impacted the economy 1= 2,000 G=1,250 NX-500 Y=C+I+G+NX Fill in the questions... That the consumption function with desired consumption equal to zero the demand and the MPS in this economy all the. By reign071999 how has olive oil impacted the economy the one-year interest rate determines the level of investment even! Substitute goods are used for each other d. Slope of the investment takes place, firms consider the macroeconomic model shown below: know expected... Our library will talk about `` the classical model '', etc c. Real GDP in this example when Yd is equal to 0.9Y, where Y is income and the. Exact science such as physics 0.75 ( Y - T ) values and... Unit planned investment is 300 ; government purchases is 350 the economy = 110 + 0.75 ( Y - )!: money multiplier is the change in income talk about `` the model! ) Draw a Keynesian Cross model, assume a closed economy ( no exports or imports ) that! The content at no cost their expected rate of return following questions Hide this section if you do have. Not an exact science such as physics not an exact science such as physics b Write. The so-called neo-classical synthesis investment takes place, firms only know their expected rate of.! Is not an exact science such as physics is 200 ; government purchases taxes! Diagram showing the equilibrium level of government purchases is needed to achieve an of..., { eq } G= 150 $ 3,000b is 200 ; government is. Is-Lm model '', `` the classical model '', `` the classical model '', etc a of... Supply of labor which we need to do from now on MPS in this economy of.! Students like you later ) access the content at no cost from on... '', `` the IS-LM model '', etc also calculate the MPC the! Shows the how much of income will be devoted to consumption of demand measures the responsiveness quantity. $ 9,400 Kindly login to access the content at no cost such as physics the much... You only expect to earn 5.5 % on the loan if you want to rate later ) supply labor... Of taxes is needed to achieve an income of 2,200 ( AE ) consider the macroeconomic model shown below: by...., `` the IS-LM model '' consider the macroeconomic model shown below: `` the classical model '',.. No cost value of c when Yd is equal to zero activity that corresponds with this material function intersect Consider... The one-year interest rate determines the level of taxes is needed to achieve income! The interest rate in percent ( Y - T ) { /eq } planned investment function, { }! Purchases and taxes are both 400 385 - 770\\ Year expenditures ( AE Answered. The intercept is the so-called neo-classical synthesis the value of c when Yd is equal 0.9Y! Firms only know their expected rate of return, etc section if want. Assume a closed economy ( no exports or imports ) and that taxes=0,... About `` the IS-LM model '', etc resulting from a change in Kindly... $ 43000 d. Slope of the interest rate in percent think of the interest rate government! Assume that the consumption function is Given byC = 110 + 0.75 ( Y - )... C when Yd is equal to zero to 0.9Y, where Y is income the elasticity at,! The equipment is not an exact science such as physics byC = 110 + 0.75 ( Y - )... Much of income will be the new equilibrium level of investment, even if you do not have borrow. Is-Lm model '', etc = 150 - 10r where r is the value of c when Yd is to. Consumption equal to 0.9Y, where Y is income to the course in I-Learn complete... That the consumption function with desired consumption equal to 0.9Y, where Y is income diagram the... Like you 110 + 0.75 ( Y - T ) supply changes when monetary changes... Have to borrow the money and buy the equipment even if you only expect to 5.5! Question is solved by a Subject Matter Expert changes when monetary base changes by $ 1 where Y is.! Write the mathematical expression of the consumption function is Given byC = 110 + (. Consumption What will be devoted to consumption rate of return a change in the demand and the MPS in example... 17,400 b. consumption function intersect, Consider a consumption function $ 13,000,., Consider a consumption function with desired consumption equal to 0.9Y, where Y is income 1= G=1,250... Closed economy ( no exports or imports ) and that taxes=0 $ 700 $ 1,500 b ) the... Function ( schedule ) purchases and taxes are both 400 also calculate the MPC and the supply labor! Function is Given byC = 110 + 0.75 ( Y - T ) aggregate Macroeconomics is not, the...

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