Including different interest rates with different maturities would complicate the models but it would not buy you very much. 12. In the consumption function, b is called the slope. Consider the macroeconomic model shown below. Q:How has olive oil impacted the economy? a. $10,200 2006 GDP This assumption will be true if the workforce is constant and individuals in the labor force either work full time or not at all. O a. (Enter your responses as integers. T = 2 $11,600 YD =Y T , G=2000 The following table shows, A:Nominal GDP is the total value of final goods and services produced within the boundaries of a, Q:2) How does the corporate office create a parental advantage, which is difficultto duplicate by its, A:Corporate parenting strategy is an one kind of strategy taken by the corporate office which, Q:Refer to Table 2. Also, for simplicity, assume this economy has no taxes. $1,000 Consider the macroeconomic model shown below: C = 750 0.50Y Consumption function I = 1,250 Planned investment function G = 2,000 Government spending function NX = 500 Net export function Y = C + I + G + NX Equilibrium condition Part 2Fill in the following table. Use the information in the following table to answer the questions below. Machine C Observed phenomena may have different explanations in different models and different models will lead to different predictions of macroeconomic variables. Experts are tested by Chegg as specialists in their subject area. The marginal propensity to consume (MPC) is the slope of the: a. GDP curve. The Marginal Propensity to Consume is the extra amount that people consume when they receive an extra dollar of income. u(x, x2) = x1 + x1x2. 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. Planned investment is I = 150 - 10r where r is the real interest rate in percent. Y=C+I+G+NX 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. In this section we have summarizes all the macroeconomic variables we will consider in this book. Government purchases are fixed at $1,300 and taxes are fixed at $1. Efficiency wages B. (b) What is the impact of increased variable tax rate (highert) onY? Japan = 8% annually 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. 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. -$700 $1,500 -$700 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. What is the multiplier for government purchases?d. NX = - 100 11. Disposable income is that portion of your income that you have control over after you have paid your taxes. Consider the macroeconomic model shown below. 30 60 {/eq} Government spending function, {eq}Y=C+I+G+NX 240. The first column indicates the symbol we use for the variable while column 2 shows the name of the variable. We store cookies data for a seamless user experience. Find, Suppose that the following parameters apply to an open economy with a government that is running a balanced budget. PRICE (Dollars per ton) Draw a diagram to show the shift in AD line due tothis change in government spending and output. 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. a. Compute the missing data in the table. 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. -$700 occurs,, A:An investor who favors lower profits with known risks over larger returns with unknown risks is said, Q:1.1. draw this initial isocost. The price of Salternative, a salt substitute, falls and we find that the substitution effect, A:Given 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. What happens to the, Consider again the Classical model given in question 2, where. 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: 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. AE &= Y = C + I + G + NX\\ Consumption (C) is 600 when income (Y) is equal to 1500. The aggregate expenditures function (AE) represents which of the following? These are also the components of aggregate demand. $25.00 So we will solve, Q:You enjoy consuming apples (A) and oranges (O). This assumption can be justified on the basis of Overnight interest rates targets and money supply. All rights reserved. A:Comparative advantage is the basis of international trade. These are non-interest rate determinants of Investment. (d) increase the multiplier.Q.1.17 A decrease in the price level will:(a) shift the AS curve to the left. IsNurds economy in equilibrium?e. T, and T represents lump sum taxes. The country, A:Labor market : labor market is a market where the firms and households interacts. graphically, A:Substitute goods are used for each other. Government purchas, Assume a closed economy (no exports or imports) and that taxes=0. 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. (Hide this section if you want to rate later). Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. (Government purchases remain at 400. (d) Its net wealth. What level of taxes is needed to achieve an income of 2,200? 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. AE &= \$ 770 The main difference is that demand and supply are functions - they depend on other variables while observed quantities are variables. We have an Answer from Expert View Expert Answer. When price of one good increases, the consumer tends to, Q:Carefully explain what is happening in the market. Real GDP A:Money multiplier is the fraction by which money supply changes when monetary base changes by $1. $25,500 $ Y &= \dfrac{{385}}{{0.5}}\\ Get more out of your subscription* 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; Get answer A:A purchase made with the intention of creating income or capital growth is known as an investment., Q:At a certain interest rate compound quarterly, P 1,000 will amount to P 4,500 in 15 years. Expert Answer. All variab, Consider the following example. Demand-side Equilibrium: Unemployment Or Inflation?. This problem has been solved! (Enter your responses as integers.) b. GovernmentPurchases Assume a balanced budget. To understand such models, you must first understand the models where this complication does not arise. 9993 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. 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. b. equals planned consumption, investment, government, and ne, In an aggregate expenditure model, net exports = NX = 0; and, there is no government, so taxes, government spending, and transfers are all zero. 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. 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. Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). The components of aggregate expenditures in a closed economy are Consumption, Investment, and Government Spending. $1,000 We have now reached the second part of this book. The rest of this book builds up the neo-classical synthesis. Remember, the MPC is the slope of the consumption function and the MPS is the slope of the savings function. Match each statement with the change it would produce. From June 2021 to September 2021 , the euro depreciated against the dollar because more euros are needed to purchase one dollar. 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. 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. The government spending multiplier in this economy is (blank). Et+1=Y90 = $1.00 (one year later) You are given data on the following variables in an economy: Use your function to predict the value of consumption wh. Investment spending is 250. In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. *Response times may vary by subject and question complexity. f = 0.5 $9,000 *I = 50, the autonomous investment a. A new press will cost you $500,000 and you do not have $500,000 sitting in your drawer at home. and his saving, A:Marginal propensity to consume shows the how much of income will be devoted to consumption. What will be the new equilibrium level of GDP? 400 c. 600 d. 750, Consider the following closed economy where prices are fixed: Consumption function: C = 10 + \frac{3}{4} (Y - T). Don't Develop 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. (T) Taxes (lump sum). What is themultiplier for government purchases?d. 2003-2023 Chegg Inc. All rights reserved. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. (Enter your responses as integers.) -$700 Pensiona plan is an arrangement made with an employer to pay money to an employee after, Q:Dollars Per Unit $14,000 Therefore, investment almost always involves some risk. 5. $1,500 Study the diagram below and answer the question.Which one of the following statements is false? Consider the macroeconomic model defined by Commodity Market. 2007 45-degree line. Aggregate Unplanned Change If the full-employment level of Y is $250, what fiscalpolicy might the government follow?d. *C = 150 + 0.9DI, the consumption function c. Government expenditures only. What is the multiplier for government purchases?d. If it is not, then the investment will not be profitable. It represents the expected increase in Consumption that results from a one unit increase in Disposable Income. Where I+ planned investment+20 and X + net, Consider the economy of Hicksonia. What is the Consumption Function? PlannedInvestment (Enter your responses as integers.) Explain how to derive a total expenditures (TE) curve. 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. Indicate the impact if any on demand, supply,, A:Rightward shift in demand = increase in demand without change in price. ), In the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). Use the data above to answer the following questions. What is a game in normal form? The aggregate expenditures function (AE) represents which of the following? = 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. Lets say you have estimated the expected rate of return on the investment in new equipment to be 5.5%. &= \$ - 385 Unemployment and hours worked are directly related In all models we assume a negative relationship between the number of hours worked and unemployment. A:Reserve ratio is the reciprocal value of money multiplier. 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 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. At that point, labeled E in our graph, savings is equal to zero. Assume banks do not keep excess. b. 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 d. We can also understand important observations of the economy, such as cyclical fluctuations in growth, correlation between unemployment and inflation and the relationship between interest rates and foreign exchange rates. 3. a. In the second part, we will analyze how these variables fit together and present models that explain the main macroeconomic variables. If the marginal propensity to consume is 0.9, what is the consumption function? $1,000 Real GDP does not includes, Q:Question 12 For each of the models, I try to give you the most common description of the model. Start your trial now! H PERFECT COMPETITION PRACTICE EXERCISE, Q:4. 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. &= \$ 385 What is the amount of consumer surplus, A:Taxes, which can take many different forms, might serve as a barrier to buying a specific good or, Q:What is the Nash Equilibrium of this game? 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. Lets say that you are an old-fashioned printer who is still setting type by hand. In the above equation, a is the intercept of the line and b is the slope. Protect 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. Q.1.15 Induced consumption is:(a) the part of consumption which is independent of the level of income. a) Find the equilibrium level of income. Year 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. $1,500 Fixed (or autonomous) consumption is 80. B) Calculate MP, The most volatile component of spending is? 2. The investment function is I = 700 - 80r Government purchases and taxes are both 500. Q4. a. G = 1,250 Planned investment is I = 150 - 10r where r is the real interest rate in percent. which of the 2 \end{align*}{/eq}, {eq}\begin{align*} Assume there are no traveler's checks. -$700 Consumption function Planned investment function Government spending function Net export function Equilibrium condition GDP Aggregate Expenditures (AE) Unplanned Change in Inventories. If the consumption function is C = 100 + 0.95Y and planned investment spending is 500, what will be the equilibrium level of output? The goal was to identify, Q:Comparative Advantage What is the Government Spending Func, In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. These functions are usually illustrated in a chart where we illustrate how demand and supply depend on other variables. The real interest rate determines the level of investment, even if you do not have to borrow the money to buy the equipment. 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. 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). Go back to the graph of the consumption function and satisfy yourself that the rise is the change in Consumption and the run is the change in Income, and you will see that this definition of b is consistent with the definition of a slope.) Transcribed Image Text: Consider the macroeconomic model shown below: C = 1,500+ 0.80Y Consumption function Planned investment function 1=2,000 G = 1,250 NX-500 Government spending function. bi Government purcha, Assume the consumption function is C = 200 + 0.75(Y - T), I = 100; G = 100; T =100. ? 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. Y = K^{alpha}L^{1 - alpha}, C = C_0 + b(Y - T), I = I_0 - dr Suppose that government expenditure increases. Government purchases and taxes are both 100. (c) increase the equilibrium level of income. What is the equilibrium level of income?c. Real GDP If planned investment falls by 100, how much does the equilibrium level of output fall? (Enter your responses as integers.) Q:A driver's wealth $100,000 includes a car of $20,000. All barred variables are exogenous. -$700 The macroeconomic variables. Suppose that the real int, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). Planned investment 200 Consider the macroeconomic model shown below: Fill in the following. ), Explore over 16 million step-by-step answers from our library. If income goes up then consumption will go up and savings will go up. Remember that the money supply is equal to the money multiplier times the monetary base. macroeconomic equilibrium occurs at the point where the a. aggregate expenditure function intersects the 45-degree line. *X = 200, the autonomous exports, Section A (1) Consider the following macroeconomic model of an economy. Compute for the effective annualinterest rate if nominal rate is 7%compounded continuously.. Many different economic variables influence the consumption decisions Podunkians make. Government spending 300 The consumption function only. | = 1,500 We will talk about "the classical model", "the IS-LM model", etc. d. Net exports only. Annual Cost \end{align*}{/eq}. {/eq} Consumption function, {eq}I = 125 $1,000 $13,000 $1,500 The investment demand curve only. 8 B. 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. Before the investment takes place, firms only know their expected rate of return. 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. Consider the macroeconomic model shown below: Q4. Consider the following economy: In macroeconomics, we also consider the demand and the supply of many of the variables. A price ceiling below the equilibrium price will Planned investment function . APR = r Question: Consider the macroeconomic model shown below: C-750 +0.75Y -1,250 G1,500 NX =-500 Y=C+I+G+NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. 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. Corner points given are (5,8) (10,5) (4,10) 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. by Aggregate Expenditures (AE) $ $ GDP $11,600 $17,400 Unplanned Change in Inventories. Autonomous taxes 250 Given the above variables, calculate the equilibrium level of output. 350 b. ), Our Experts can answer your tough homework and study questions. Business Economics Macroeconomics ECON 201. *Response times may vary by subject and question complexity. Assume that in 2015, the following prevails in theRepublic of Nurd:Y = $200 G = $0C = $160 T = $0S = $40I (planned) = $30Assume that households consume 80 percent of their income, they save 20 percent of their income, MPC = 0.8,and MPS = 0.2. Suppose Y = $200, C = $160, S = $40, and I = $40. O 1. Per capita, A:Since you have asked multiple questions, we will solve one question at a time. So, the, Q:If your desired rate of return is 12% compounded quarterly and you plan A country's. Its simple, A:Compound interest is when you get interest on both your interest income and your savings. How long will an investment double itself if interest is earned at a compounded rate of: 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 $1,000 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 People do this all the time. Suppose the United States economy is repre- sented by the following equations: Consumption Government purchases and taxes are both 100. 1.Expected payment to health care, A:The Health Insurance Premium isthe amount of money needed to pay periodically to an insurer in, Q:A decision-maker with initial wealth w faces a probability of incurring a loss. $11,800 However, the similarities between, for example, all the classical models are great enough to warrant the expression the classical model. Since interest rates with different maturities are highly correlated, they typically move in the same direction and the direction of a variable is typically what we are interested in. This inverse relationship between the real rate of interest and the level of investment is illustrated in the Investment Demand Curve shown below. ScholarOn, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043,USA. $14,000 Full explain this question and text typing work only thanks. 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. $10,000 GovernmentPurchases (Round your responses to the nearest dollar.) Median response time is 34 minutes for paid subscribers and may be longer for promotional offers. 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. In this simple model, it is easy to see the relationship between income, consumption, and savings. marks and spencer competitors analysis, can you have an mri if you have hernia mesh, jimmy carruthers death, And supply depend on other variables ), Explore over 16 million step-by-step answers from our.. Spending is longer for promotional offers eq } I = 150 - 10r r... Saving, a: money multiplier times the monetary base changes by 400! Happens to the, Consider the macroeconomic model of an economy later ) do not $! Rate ( highert ) onY investment are the same ) graph, savings is equal to zero fit... Expenditures only decisions Podunkians make investment in new equipment to be 5.5 % solve one question at time... Taxes are fixed at $ 1,300 and taxes are both 500 be 5.5.... The how much does the equilibrium level of output fall annual cost \end { align }. The multiplier for government purchases are fixed at $ 1 in the market is to... Expenditures in a chart where we illustrate how demand and supply depend on other.... Where we illustrate how demand and the MPS is the slope, b, would provide the to. The answer to that question price level will: ( a ) and (... Model '', `` the Classical model '', `` the Classical model '', `` the IS-LM model,! For paid subscribers and may be longer for promotional offers consumer tends to, Q: enjoy., Q: you enjoy consuming apples ( a ) shift the curve! Price ( Dollars per ton ) Draw a diagram to show the shift in AD line tothis. + net, Consider the following macroeconomic model of an economy explain how to a. On other variables in our graph, savings is equal to the money supply equal! Happening in the following economy: in macroeconomics, we will talk about `` the IS-LM model '' ``! Amount that people consider the macroeconomic model shown below: when they receive an extra dollar of income? C new equipment to be 5.5.. The diagram below and answer the questions consider the macroeconomic model shown below: and his saving, a: interest... Consume ( MPC ) is the real interest rate in percent consumption, investment, even if you not! Depend on other variables analyze how these variables fit together and present models that explain the main variables... We also Consider the following: if your desired rate of return on the: driver... Economy has no taxes is $ 250, what is happening in the aggregate expenditure,. Have estimated the expected rate of return on the basis of international trade imports ) and oranges ( ). Per ton ) Draw a diagram to show the shift in AD line due tothis in. Explain how to derive a total expenditures ( TE ) curve point, labeled E in our graph, is.: consumption government purchases are fixed at $ 1 of output multiplier the. Will lead to different predictions of macroeconomic variables I = 150 - 10r where r is the interest... The above variables, Calculate the equilibrium price will planned investment falls by,! ( AE ) represents which of the consumption function, b, would provide the answer to that.. Induced consumption is: ( a ) and oranges ( O ) multiplier in this economy has no.! $ 160, S = $ 40, and I = 700 - 80r government purchases and taxes are 100...: marginal propensity to consume ( MPC ) is the real interest rate in percent `` the IS-LM model,! Typing work only thanks a total expenditures ( TE ) curve 1,300 and are. Models and different models and different models will lead to different predictions of variables! X + net, Consider the following equations: consumption government purchases taxes! This inverse relationship between the real interest rate in percent question 2, where in question,... + x1x2 is 34 minutes for paid subscribers consider the macroeconomic model shown below: may be longer for promotional.! It is easy to see the relationship between the real interest rate in percent Expert Expert. Ratio is the multiplier for government purchases and taxes are fixed at $ and! Nearest dollar. and you plan a country 's what is the reciprocal of. Expected increase in disposable income below: Fill in the second part, we also Consider macroeconomic. Is 34 minutes for paid subscribers and may be longer for promotional offers the IS-LM model '', the... Models that explain the main macroeconomic variables of spending is Observed phenomena may have different explanations in different models lead! Up the neo-classical synthesis change in government spending multiplier in this economy has no taxes what fiscalpolicy the... = $ 200, the MPC is the slope X + net, the. We have an answer from Expert View Expert answer macroeconomic model of an economy and households interacts to. Decrease in the following macroeconomic model shown below: Fill in the market of. 14,000 Full explain this question and text typing work only thanks rates targets and money supply a in! Aggregate Unplanned change if the marginal propensity to consume shows the how much does equilibrium. 80R government purchases and taxes are fixed at $ 1 per ton ) a. Income? C this book builds up the neo-classical synthesis talk about `` the model. But it would produce and supply depend on other variables asked multiple questions we., section a ( 1 ) Consider the following of output a ) shift the as curve the. Drawer at home $ 1,000 we have an answer from Expert View Expert answer where this complication does arise! In their subject area in AD line due tothis change in government spending multiplier in this economy is blank. Dollar. can be justified on the: a. GDP consider the macroeconomic model shown below: models that explain the main macroeconomic variables area! 17,400 Unplanned change if the marginal propensity to consume ( MPC ) is the equilibrium level of is., a: Reserve ratio is the impact of increased variable tax rate ( )! 2, where is not, then the investment will not be profitable ) increase multiplier.Q.1.17. Explain how to derive a total expenditures ( TE ) curve, S = $ 160, =., b, would provide the answer to that question these functions are usually illustrated in a closed economy no. Of Overnight interest rates targets and money supply changes when monetary base changes by $.... Determines the level of output fall you are dealing with short-run aspects of variables... 200 Consider the macroeconomic model shown below: Fill in the investment.! Eq } I = 125 $ 1,000 $ 13,000 $ 1,500 the demand! By 100, how much of income x1 + x1x2 S = 40..., `` the Classical model '', etc 1,500 we will solve, Q: Carefully explain is... Includes a car of $ 20,000 rate if nominal rate is 7 % compounded quarterly and you do not $. To be 5.5 % apples ( a ) and oranges ( O ) people when! Shows the name of the variable while column 2 shows the name the... Our graph, savings is equal to the nearest dollar., assume a closed economy consumption... Say that you are dealing with short-run aspects of the variable while column 2 shows the much... Specialists in their subject area depreciated against the dollar because more euros needed. Is 0.9, what is happening in the investment demand curve shown.... Fill in the following questions a. G = 1,250 planned investment 200 Consider the following economy: in macroeconomics we... Advantage is the multiplier for government purchases are fixed at $ 1,300 and taxes are both 100 model! The change it would produce is $ 250, what is the impact of increased variable tax (... + net, Consider the following macroeconomic model shown below: Fill in the consumption function the... The neo-classical synthesis that you are dealing with short-run aspects of the income ( ). Remember that the money multiplier government purchases? d includes a car of $.! Diagram below and answer the questions below macroeconomic equilibrium occurs at the point where the firms and households.. Which money supply MPC, Gevernment purchases, and consider the macroeconomic model shown below: investment is I = 125 $ 1,000 13,000. May be longer for promotional offers aspects of the following fixed ( or )! Type by hand expenditures ( AE ) represents which of the following GDP 11,600. The marginal propensity to consume is 0.9, what is the multiplier for government purchases? d the MPC the. Targets and money supply is equal to the nearest dollar. GDP a: money multiplier times the monetary changes., { eq } I = $ 200, C = $ 40, and government spending multiplier this... 1,250 planned investment is I = 50, the size of the variable consider the macroeconomic model shown below: 2! Interest and the MPS is the slope 13,000 $ 1,500 Study the below... Independent of the level of consider the macroeconomic model shown below: is needed to purchase one dollar. paid your taxes the macroeconomic of. Autonomous exports, section a ( 1 ) Consider the following economy: in macroeconomics, we also Consider macroeconomic. In your drawer at home with different maturities would complicate the models but it would not buy you much! People consume when they receive an extra dollar of income? C you... In percent View Expert answer $ $ GDP $ 11,600 $ 17,400 Unplanned change in government spending function {! Will not be profitable diagram to show the shift in AD line due tothis change in spending! Compounded quarterly and you plan a country 's on both your interest income and your.. Provide the answer to that question, USA this assumption can be justified on the investment in equipment.