consider the macroeconomic model shown below:

The formula for average variable, Q:A machine currently under consideration by Marcus Industries has a cost of $31, 000. Suppose that the exchange rate between the dollar and the euro was euro 0.830 per dollar in June 2021 and euro 0.850 per dollar in September 2021. Expert Answer . A:Reserve ratio is the reciprocal value of money multiplier. Get plagiarism-free solution within 48 hours. The consumption function is given by C = 300 + 0.6(Y - T ). However, we know that there is a negative relationship between the target rate and the money supply. In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. a. 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%. G = 2.65 $1,500 n = 10 Years B) Write the mathematical expression of the investment function. 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 the. *G = 100, the autonomous government spending Suppose that w = $10,r=, A:Isocost(I) line/curve shows/depicts the combination of inputs(L and K) that has an equal cost. What is the new equilibrium level of output? 0 signifies, Q:A reserve price is a minimum price set by the auctioneer. What level of government purchases is needed to achieve an income of 2,400? What is the equilibrium level of income?c. $11,800 \end{align*}{/eq}, {eq}\begin{align*} Government purchases are fixed at $1,300 and taxes are fixed at $1. 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. Canada, the United States, and Mexico in the, A:The transfer of commodities, services, money, and technological advancements between nations is, Q:An asset is purchased for P 90,000. 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 What level of taxes is needed to achieve an income of 2,400? 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. 6 days ago, Posted The marginal propensity to consume is ____. Q:What is the term "investment" define? . Including different interest rates with different maturities would complicate the models but it would not buy you very much. 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. In the circular flow model, investment, government spending, and exports are classified as: A) injections. $17,400 Suppose the United States economy is repre- sented by the following equations: What is equilibrium GDP? View this solution and millions of others when you join today! Motivation for this assumption and the consequences of this assumption can be found in section 16.2. O the Trade-off between two goods national income: Y = C +I +G. $25.00 the The firms demands, Q:Q2. Y - 0.5Y &= 385\\ In all models except those in Chapter 16 we will assume that the exchange rate is flexible. Planned investment is I = 150 - 10r where r is the real interest rate in percent. Firm Develop \end{align*}{/eq}. 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. (b) reduce the multiplier. (Enter your responses as integers.) In this section we have summarizes all the macroeconomic variables we will consider in this book. d = 0.1 This E-mail is already registered as a Premium Member with us. The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. What is the equilibrium level of income?c. Investment function: I = i_0 - i_1r + i_2 Consumption function: C = a + b(Y - T) - cr There is no government expenditure. The components of aggregate demand are: a. Infant Deaths per 1,000 Live Births 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. falling value of the U.S. dollar in, A:The Federal reserve is the apex financial institution and it supervises the money supply and seeks, Q:a. We will in the rest of the book discuss a number of macroeconomic models. Consumption function: C = 40 + 0.9Y_D Planned investment: I = 40 Government expenditure: G = 60 Tax function: T = 0.2Y Exports of the country: X = 14 Import function: M = 10 + 0.02Y Assume there are no transfer payments and no autonomous taxes. (Enter your responses as integers.) graphically, A:Substitute goods are used for each other. If Income is measured in dollars, you might ask the question, How much would your Consumption increase if your Income were increased by one dollar? The slope, b, would provide the answer to that question. If a bank with $500 in deposits is holding reserves of $60 when the reserve ratio is Car 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. -$700 The main difference is that demand and supply are functions - they depend on other variables while observed quantities are variables. This problem has been solved! $1,000 b. 21,302 C) transfers. *C = 150 + 0.9DI, the consumption function price, and the, A:Market demand for a commodity can change as a result of a change in consumers income, their tastes. Lets say you have estimated the expected rate of return on the investment in new equipment to be 5.5%. Short-run equilibrium ou, Answer the following questions for a specific model where the consumption function is given as C = 80 + 0.6Y, investments are 120, and there is no government purchases and no net exports. Consumption, exports, imports, and disposable income, c. Consumption, inventory, government spending, and disposable income, d. Exports, imports. the Keynesian spending multiplier is? 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. Q:30. But you need to keep this in mind. If government purchases increase to 400, what is the new equilibrium income? b. PlannedInvestment A:Elasticity of demand depicts how much consumer responds with the change in the price level. The most important one is the target interest rate for the overnight market. Fixed (or autonomous) consumption is 80. Assume there are no traveler's checks. &= \$ - 385 The Keynesian spending multiplier in the economy is _____. $1,000 The coupon rate is 6% with quarterly payment Income tax rate 0.1 Find answers to questions asked by students like you. D) consumption expenditures. The government spending multiplier in this economy is (blank). T, and T represents lump sum taxes. $8,600 $14,000 You know that your equipment is slow and outdated. Find, Suppose that the following parameters apply to an open economy with a government that is running a balanced budget. MC strategy in a normal-form game?, A:Game theory is the study of how interdependent decisions made by economic agents result in outcomes, Q:14. If domestic prices increase by 10% while the currency loose 10%, the price of domestically produced goods abroad will be unchanged. 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. 4TY, Your question is solved by a Subject Matter Expert. 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. consumption b. investment c. government purchases d. net exports, Assume an individual has a utility function U(C, L) = 6 + CL. P40,000.00 PER YEAR., A:Rate of Return: $1,500 O $1,500 Get additonal benefits from the subscription, Explore recently answered questions from the same subject, Test your understanding with interactive textbook solutions, Explore documents and answered questions from similar courses. a. 6. Q:After graduating from college in 2010, Art Major's starting salary is $30757.00. What if one of these non-income determinants of consumption changes? b. $1,000 The saving function? What is the GDP Deflator for Year 2? sy = (n+d)k The dollars spent on the investment have the immediate impact of increasing spending in the current time period. $1,406,000,000 Question 1. A. 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. Consider the little country of Podunk. In this section we have summarizes all the macroeconomic variables we will consider in this book. a. Compute the missing data in the table. In Chapter 16 we will study other currency system, other models of foreign exchange rate determination and how exports and imports depend on the domestic price level. Suppose the consumption function is C = \bar{C} + c(Y -T), where C is a parameter called autonomous consumption that r, Consider an economy with I = 0, G = 0, T = 0, and NX = 0, but with the following consumption function: C = \bar C + MPC ? 1. People do this all the time. Explain in a economic sense. S = 10% annually Government purchases and taxes are both 100. Consumption, government spending, net exports, and investment, b. $1,500 Graph planned expenditure as a function of income.b. A. Solve. 8 B. 5. To know more check the A 1 percent increase in the price of the good causes quantity demanded $11,000 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. Our verified expert tutors typically answer within 15-30 minutes. How much does income change as a result of this event? The bond, Q:Home prices in a particular neighborhood average $350k with a standard deviation of $30k. 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. Q:You are the Minister of Trade for a small island country with the following annual PPC: d. Net exports only. Consider the macroeconomic model shown below: |C= 500+ .75Y |Consumption function |I = 1500 |Planned investment function |G = 1000 |Government spending function |NX = -500 |Net export function |Y, Consider an economy in which the consumption function takes the following algebraic form, C = 300 + 0.75DI, and in which investment (I) is always 900 and net exports are always 100. $3,000b. The first column . Planned investment is I = 150 - 10r where r is the real interest rate in percent. 200. What is a strictly dominated Observed phenomena may have different explanations in different models and different models will lead to different predictions of macroeconomic variables. Machine B Before developing the Keynesian Aggregate Expenditures model, we must understand the basic macroeconomic relationships that are the components of that model. Investment (I) c. Consumption (C) d. Net exports (X - M) e. Saving, Marginal Propensity to consume is 0.3. Nominal interest rate (i) = 7% or 0.07 compounded continuously. Consider the macroeconomic model shown below: C= 100+0.50Y C = 100 + 0.50 Y Consumption function I = 125 I = 125 Planned investment function G= 150 G = 150 Government spending function N X = 10 N. $1,500 Derive the consumption function and use this relation in the aggregate demand function to derivean equation for the equilibrium in the goods market . Equilibrium condition coays What is, A:Given that, 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. Match the names of these axioms to the, A:Expected Utility Theory: The price of Salternative, a salt substitute, falls and we find that the substitution effect, A:Given 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. Suppose Y = $200, C = $160, S = $40, and I = $40. 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. 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 What is the equilibrium level of income?c. Japan = 8% annually NX-500 All rights reserved. 20.00 Government spending (G) b. Government spending: G = 60. In the Keynesian model equilibrium national income. 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. 410 (Enter your responses as integers. Although we use the term the classical model as if there were only one classical model, this is not quite true. Consider the macroeconomic model defined by Commodity Market. 10000 Given the above variables, calculate the equilibrium level of output. Any change in disposable income will move you along the Functions. Before the investment takes place, firms only know their expected rate of return. Exports: EX = 20. (c) The number of persons in the household. What level of taxes is needed to achieve an income of 2,200? Suppose that the real, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). How can savings be negative? (T) Taxes (lump sum). A country's. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. 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. Consider the macroeconomic model shown below: Part 2Fill in the following table. Draw a diagram to show the shift in AD line due tothis change in government spending and output. Leftward shift in demand=, Q:The following table contains data for a hypothetical closed economy that uses the dollar as its, A:The term "government spending" describes the cash that the government spends on various goods and, Q:15. Furthermore, we assume that the exchange rate is determined by the ratio of the domestic price level to the foreign price level. (b) Total wealth. The consumption function is given by C=400+Y. 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. 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. What is the equilibrium level of income?c. N We review their content and use your feedback to keep the quality high. Solution 5 (1 Ratings ) Solved 200 Annual costs=$18000 After going through the example, I will give you a separate set of data and ask you to do the same thing! P, W, R, r and E apply at a given point in time while , e, w and E apply over a period of time. Planned investment 200 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 In the Keynesian cross framework, fill in the following table: Slope up, Down, or flat What determines slope What moves entire function up or down Consumption function Investment function Government, Consider an economy is which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate ch, Consider the following function of an economy: C = 300 + 0.70 (Y - T) is the consumption function I = 300 - 30r is the investment function (M/P)^d = Y -100r the money demand. NX = - 100 Government spending b. If agents decide to save and invest a larger, A:Steady state equilibrium in solow model is 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. a. Don't Develop Unplanned Change 135 1) Inflation, A:Economics is where the phrase "leading indicator" first appeared. $9,000 YEAR: CPI (2002=100) CPI INFLATION: 2010: 116.5: 1.8: . 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. Real GDP How will each of the following scenarios impact the market for labour This utility function implies that the individual's marginal utility of leisure is C and her marginal utility of consumption is L. The individual has an endowment of V in non-labor income and T. The first interest rate was a description of the macroeconomic variables and institutions. there isan income tax t=0.1, B) Calculate MP, The most volatile component of spending is? {/eq} Consumption function, {eq}I = 125 $11,000 $1,500 C. 250. The price of the old machine was $25000 (f) Now assume that employmentNis positively related toY. $17,000 4-14 If planned investment is 100 and T is 100, then the level of G needed to make equilibrium Y equal 1,000 is A. In the above equation, a is the intercept of the line and b is the slope. (Government purchases remain at 400.). a. Two products are complements if a decrease in the price of one causes an increase in, Q:The following is a table showing Erica's marginal benefit from purchasing bottles of 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. Government purchases and taxes are both 100. (a) Disposable income. b. disposable income curve. Imports: IM = 0.005Yd. 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. 30 60 Most reasonable models in which the domestic interest rate is affected by foreign interest rates are more complicated. Price of good 1 : P1 , Price of good 2 : P2 Germany Consumption? Consider the following economy: &= \$ 385 500 Kindly login to access the content at no cost. one year ago, Posted Aggregate -$700 of households to each other and to the, A:Theil index is the measurement method for racial inequality. Cash Flow Return to the course in I-Learn and complete the activity that corresponds with this material. Step-1 Given data , According to given data , now calculate GDP le What is the multiplier for government purchases?d. Investment is 500 and government expenditures are 300. 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. The investment demand curve only. Planned investment is I = 150 - 10r where r is the real interest rate in percent. The budget deficit is 100. $ Explain how to derive a total expenditures (TE) curve. u(W)=W. Government purchases and taxes are both 100. by $ As with consumption, we will assume that this relationship is linear: In this equation the intercept is e, the autonomous level of Savings. Write down the LM function. e. All of the answers above combined. Q4. (Hide this section if you want to rate later). Q:What is a defined benefit pension plan and explain the pros and cons? 0.2 b. What is the Investment Function? As a, A:Disclaimer- Since you have asked multiple question, we will solve the first three question for you, Q:Figure Chase Rive Concert Tickets GDP 240. Aggregate Expenditures (AE) $ $ GDP $11,600 $17,400 Unplanned Change in Inventories. One model that is very popular in virtually all basic courses in macroeconomics all over the world is the so-called neo-classical synthesis. That is, C = 0.8Yd and S = 0.2Yd.a. Surplus :- This is the, Q:Different countries collect and spend their taxes in different ways. 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. 3. a. If the full-employment level of Y is $250, what fiscalpolicy might the government follow?d. For each of the models, I try to give you the most common description of the model. To simplify our discussion, we will assume that Consumption is a linear function of Disposable Income, just as it was graphically shown above. C. consumption must equal investment. A new press will cost you $500,000 and you do not have $500,000 sitting in your drawer at home. 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. Notice that when we graph the Consumption Function, Consumption is measured on the vertical axis and disposable income is measured on the horizontal axis. In this section we will describe the assumptions that will apply throughout the rest of the book. What is the total level of Consumption? In order to separate the supply and the demand from the observed quantity, we use subscript S for supply and subscript D for demand. (Taxes remain at 400.)e. MARR=10%, A:Machine A In the second part, we will analyze how these variables fit together and present models that explain the main macroeconomic variables. Also, for simplicity, assume this economy has no taxes. u(x, x2) = x1 + x1x2. there is no income tax in the economy. (Mark all that apply.) Consider the following macroeconomic model: Y = C + I + G + X Y = + (Y T) + ( R) + + Y Y = + (Y + t Y) + ( R) + + Y Y = + Y + t Y + R + + Y Y ( + t 1) R + + + + = 0 Y ( + t 1) R = - - - - L = Y R M = L = M = Y R Y - )/ Y ( + t 1) Y - )/ = - - - - Y ( + t 1 ) + )/ = - - - - Y ( + t 1) = - - - - + - )/ Y = Y - )/ = (a) From the above equation, increase in the lump-sum taxation, will result in increase Posted Consider the macroeconomic model shown below: Fill in the following Access to over 100 million course-specific study resources, 24/7 help from Expert Tutors on 140+ subjects, Full access to over 1 million Textbook Solutions, This textbook can be purchased at www.amazon.com. Many different economic variables influence the consumption decisions Podunkians make. $1,000 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. Net export function If the real interest rate at the bank is 6%, you would not buy the machines. C = 1,500+ 0.80Y (1) Salary in 2011 = Salary in 2010 * ( CPI in 2011 / CPI in 2010) These are also the components of aggregate demand. 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 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 $14,000 Consumption? The consumption function only. $11,000 | = 1,500 (a) The macroeconomic variables. Calculate the equilibrium level of output. Calculat. (Enter your responses as integers.) If they are more than real national income, there is surplus stock in the country. $1,000 $1,000 At income levels to the right of point E (like Io), savings is positive because consumption is below income, and at income levels to the left of point E (like I'), savings is negative because consumption is above income. If the rate of return is, Q:2. If you, for example, learn the IS-LM model from this book, you will definitely recognize it in other text books that might describe it in a slightly different way. $1,500 ), Our Experts can answer your tough homework and study questions. 2007-2023 Learnify Technologies Private Limited. For this ec, Refer to the table below to complete the questions. $11,800 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. 350 b. To simplify, we assume that the economy is not growing. If the marginal propensity to consume is 0.8, the tax rate is 0.2, the marginal propensity to import is 0.4, autonomous consumption is $100, autonomous investment is $50, government spending is $20, and exports are $10, then what is income? In this simple model, it is easy to see the relationship between income, consumption, and savings. to decrease. Annual Revenue=$40000 consumption: C = a+b (1-t)Y (a > 0, 0. investment: I = e-`R (e > 0, ` > 0) Money Market. $1,000 (c) The maximum level of consumption that is financed from sources otherthan income. c. Government expenditures only. (Enter your responses as integers.) A:Opportunity cost refers to the loss of next best alternative while making a decision. $ n, Q:The premium of health insurance consists of these two factors: AE &= Y = C + I + G + NX\\ Planned investment is I = 150 - 10r where r is the real interest rate in percent. (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. Explain how to derive a total expenditures (TE) curve.

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