ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy? Equilibrium GDP (Y) = $ . b. What happens to equilibrium Y if Ig changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .

ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy? Equilibrium GDP (Y) = $ . b. What happens to equilibrium Y if Ig changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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3. Consider the following information on a 4-sector (“private-public-open”) economy, where Y stands for the GDP and Ca, Ig, and Xn are respectively consumption after tax, autonomous investment and next exports. Ca = 40 + 0.80 (Y-T) Ig = 30 Xn= 10 T=20 G=20 DI-Y-T Use the information above to solve for equilibrium value of GDP (Y), DI, Ca, Sa, and APC, and APS. Show all your calculations. Show the 4-sector equilibrium GDP graphically. What is autonomous consumption, MPC, MPS, and the multipliers for G and T in this economy? If GDP =520, what would be AEa? Will there be unplanned inventory investment or disinvestment? Will GDP increase or decrease? Why? Explain. At GDP=520, what would be planned investment? actual investment?
n an effort to make sales projections, M/s K, B and A, the three B-school executives of Vengaboys Inc., were discussing about the national income and its growth in Ibiza. K had estimated a linear consumption function for Ibiza to be C = 100 + 0.6 Y, and investment to be I = 100 per ear. In Ibiza, there was no income tax and government spending was minimal (assume 0). Ibiza was a closed economy, and hence no exports and imports. (i)K immediately knew what the investment Multiplier was. Can you find out? (ii)What is the level of income in Ibiza? (iii)K estimated that with Government spending 100 on a new road to be constructed, the income levels are sure to go up. K quickly calculated the change in income and the new income level to be:
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C=100+ 0.8Y. Assume further that planned investment lg, government spending G, and net exports Xn are independent of the level of real GDP and constant at /g=60, G= 0, and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C+ Ig+G+X Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Y if lg changes to 40? $ What does this outcome reveal about the size of the multiplier? Multiplier =
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5. Consider the following is the economy of Country Z: C = 200 + 0.85Y I= 100 Answer the following questions: (a) Calculate the equilibrium level of output algebraically using the saving-investment (S-I) approach. (b) What is the value of saving at the equilibrium output from part (a)? (c) Suppose the investment increases to 200. What is the new equilibrium level ot output? Calculate the value using the multiplier approach.