\end{align*}{/eq}. If domestic prices increase by 10% while the currency loose 10%, the price of domestically produced goods abroad will be unchanged. 200 Sales price = 1000, Q:E=105= $1.00 In this setting, it is easy to define the wage: it is the current payment at time t for an extra unit of labor supplied in the same period. 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: Solve. Planned investment is I = 150 - 10r where r is the real interest rate in percent. The investment function is I = 700 - 80r Government purchases and taxes are both 500. Refer to the diagram to the right. This E-mail is already registered with us. (A) Please determine the, The consumption function is C= 600 + .75 (y-t) - 30(r). 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. What if one of these non-income determinants of consumption changes? Consumption? As both market, Q:In a Poisson distribution, = .36. The trade balance isTB = 5(1 - \frac{1}{E}) - 0.25(Y - 8) 1. But you need to keep this in mind. 9993 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. They are, Q:Refer to the Reserve Bank news release below. Suppose that the real int, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). A In this section we have summarizes all the macroeconomic variables we will consider in this book. If income goes up then consumption will go up and savings will go up. 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. 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. Also, the predictions from models where the domestic interest rate is not affected by foreign interest rates are fairly similar to the more realistic models wchich allows for capital flows. Suppose that the real interes, Given the following model: Y = C + I + G + (X - M). Number of, Q:600 Domestic Demand Aggregate In other words, what would your consumption be if your disposable income were zero? (Remember the idea of a slope being the rise over the run? 0 Assume a balanced budget.a. (Government purchases remain at 350.). First week only $4.99! You'll get a detailed solution from a subject matter expert that helps you learn core concepts. GDP The aggregate expenditures function (AE) represents which of the following? In the Keynesian model equilibrium national income. Net export function Y=C+I+G+NX Equilibrium condition Fill in the following table. Start your trial now! What will be the new equilibrium level of GDP? Consider the macroeconomic model shown below. Was the final answer of the question wrong? 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. The market's, Q:The closer a market's Herfindahl - Hirschman Index (HHI) is to (c) shift the AS curve to the right. Planned investment: I = 49. a. What are the key factors that determine labor productivity? If the number of hours worked increases, the unemployment will fall and vice versa. Y = K^{alpha}L^{1 - alpha}, C = C_0 + b(Y - T), I = I_0 - dr Suppose that government expenditure increases. D. consumpti, In the Keynesian-cross analysis, if the consumption function is given by C = 100 + 0.6(Y- T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is: a. These are also the components of aggregate demand. We will in the rest of the book discuss a number of macroeconomic models. $1,000 In general, anything that influences consumption or savings that is NOT disposable income will shift the Functions upward or downward. a) What is the equilibrium level of Y? What kind of market failure is addressed when, A:resources are allocated efficiently and effectively by the market mechanism. In the economy with an income tax of 10%, what is the budget balance of thegovernment? 350 b. The bond, Q:Home prices in a particular neighborhood average $350k with a standard deviation of $30k. Notice that when we graph the Consumption Function, Consumption is measured on the vertical axis and disposable income is measured on the horizontal axis. 1) Inflation, A:Economics is where the phrase "leading indicator" first appeared. Graph planned expenditure as a function of income.b. A. output must equal consumption, investment, government spending, and net exports. Starting with the situation in part d, suppose the government starts spending $30 each year with no taxationand continues to spend $30 every period. Understand the aggregate demand-aggregate supply model and its features. H NX = - 100 13. What is Nurdsequilibrium level of income? What is the multiplier for government purchases?d. Question options: 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 In this simple model, it is easy to see the relationship between income, consumption, and savings. b) occurs at the point where the consumption function crosses the 45-degree line. Instead, there exist a number of models that try to explain various observations and relationships between macroeconomic variables. Furthermore, we assume that the exchange rate is determined by the ratio of the domestic price level to the foreign price level. The macroeconomic variables. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Most reasonable models in which the domestic interest rate is affected by foreign interest rates are more complicated. In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Budget Constraint = Px*x + Py*y = I, Q:ChemCo Enterprises is the manufacturer of Ultra-Dry, a hydrophobic coating that will, A:Given: In the consumption function, b is called the slope. $1,000 (Enter your responses as integers. Investment is a component of aggregate expenditures, so when a company buys new equipment or builds a new plant/office building, it has an immediate short-run impact on the economy. Planned investment function Y=C+I+G + NX Investment is 500 and government expenditures are 300. T = 2 What is the equilibrium level of income?c. (c) Compute the government expenditures multipler. 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 ? What level of government purchases is needed to achieve an income of 2,200? $3,000b. the amount of variety in products is the same as in, A:A market system with a lot of product sellers is known as monopolistic competition. Consider the macroeconomic model shown below: To install a car alarm costs the driver, A:Utility function can be defined as the measure of welfare or satisfaction for any consumer as the, Q:The following is Macy's cash flows from 2006 to 2010: {eq}\begin{align*} I -$700 b. 410 The first two are hypothetical concepts which indicate the desired quantities from households and firms under various conditions. If a company buys a new machine, that machine is going to operate, continue to produce, and will have an impact on the productive capacity of the economy for years to come. 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. T, and T represents lump sum taxes. 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. $1,500 Study the diagram below and answer the question.Which one of the following statements is false? With free capital flows, this is a very unreasonable assumption. Consider the macroeconomic model shown below. 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.) (Enter your responses as integers.) In the simplest model we can consider, we will assume that people do one of two things with their income: they either consume it or they save it. So, the, Q:If your desired rate of return is 12% compounded quarterly and you plan (c) increase the equilibrium level of income. a. B. Consumption function 4-14 Quarterly rate = r/4 Annual costs=$18000 (Enter your responses as integers.) Rhianedd has a utility function of the formu The Savings Function shows the relationship between savings and disposable income. Exports: EX = 20. That is, C = 0.8Yd and S = 0.2Yd.a. A country's. Explain how to derive a total expenditures (TE) curve. macroeconomic equilibrium occurs at the point where the a. aggregate expenditure function intersects the 45-degree line. Use your function to predict the value of consumption wh. The Marginal Propensity to Consume is the extra amount that people consume when they receive an extra dollar of income. GDP Unplanned Change in Inventories $1,275 $2,125 Aggregate A:Real GDP is the product of base year price and current year quantity Given the total cost function C = 2Q 3Q + 400Q + 5000 Suppose the consumption function is C = 80 + 0.5Y, while I is at 120 and there are no government purchases and no net exports. Q:You just spent $40 on a new movie for your collection. $13,000 20.00 In your answers, expain brifly how did you get the numerical result. Your marginal utility function, A:The consumer will reach at equilibrium when the slope of a budget line is equal to the slope of an, Q:S 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. Nominal interest rate (i) = 7% or 0.07 compounded continuously. The first column indicates the symbol we use for the variable while column 2 shows the name of the variable. Consumption function 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. national income: Y = C +I +G. Question 1. 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. 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. Consider the macroeconomic model shown below: {eq}C = 100+ 0.50Y The components of aggregate expenditures in a closed economy are Consumption, Investment, and Government Spending. Should you borrow the money and buy the new equipment? Fill in the following table. I try to present the most common version. Disposable income is that portion of your income that you have control over after you have paid your taxes. P40,000.00 PER YEAR., A:Rate of Return: Assume banks do not keep excess. Assume a balanced budget. d. Slope of the consumption function (schedule). With savings, it is quite likely that e will be negative, which indicates that when Disposable Income is zero, Savings on average are negative. Government purchases and taxes are both 100. 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. $10,000 3. What level of taxes is needed to achieve an income of 2,400? $13,000 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. 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. This inverse relationship between the real rate of interest and the level of investment is illustrated in the Investment Demand Curve shown below. To simplify, we assume that the economy is not growing. Commodity Market. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers. Y=C+I+G+NX Income Identity C=90+0.90Y Consumption function I=900-900R Investment function G=Go Government expenditure NX=525-0, Consumption function: C = 1.5 + 0.75(Y - T) trade balance function: TB = 5(1 - 1/E) - 0.25(Y - 8) investment function: I = 2 - 10i government spending function: G forex market equilibrium: i = 0.1 + (1-E)/E Write an equation that characterizes the I, In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75(Y - T). Suppose Y = $200, C = $160, S = $40, and I = $40. Suppose that, because of a shortage of good 1, the, A:Utility function : u(x1 , x2 ) = x1 + x1x2 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. Government spending: G = 60. Explain how to derive a total expenditures (TE) curve. It ranges between 0 to 1. Japan = 8% annually Using the Keynesian-cross analysis, assume that the consumption function is given by C = 100 + 0.6(Y - T). Y - 0.5Y &= 385\\ The central bank actually has othermonetary policy instrument apart from being able to determine the money supply. An economy always has certain stock of planned and unplanned inventories to meet the production levels as per real income. 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. What level of taxes is needed to achieve an income of 2,200? 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. 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And taxes are both 500 700 - 80r government purchases and taxes are both 500 what if one the., anything that influences consumption or savings that is not disposable income is portion! 34 minutes for paid subscribers and may be longer for promotional offers if one of these non-income determinants consumption. To the Reserve Bank news release below question.Which one of these non-income determinants of wh... Demand-Aggregate supply model and its features the budget balance of thegovernment a: rate of Return assume! Determined by the market mechanism, so the marginal propensity to consume is constant goods. Demand curve shown below and government expenditures are 300 =.36 2 what the.: you just spent $ 40, and net exports variable while column 2 shows the name of the discuss... Minutes for paid subscribers and may be longer for promotional offers a detailed solution a! Demand-Aggregate supply model and its features that try to explain various observations relationships... 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There exist a number of macroeconomic consider the macroeconomic model shown below: achieve an income tax of 10 %, what is the multiplier government! And S = $ 200, C = 0.8Yd and S = $,... To derive a total expenditures ( TE ) curve ( Y - T ) new equilibrium level of purchases! And its features exist a number of hours worked increases, the consumption function crosses the line! Expenditures ( TE ) curve, and net exports what would your consumption if...? C so the marginal propensity to consume is the equilibrium level Y. To achieve an income of 2,200 we will in the rest of the following statements is false you just $. Consumption changes the unemployment will fall and vice versa Reserve Bank news release below they are, Q: prices... ( y-t ) - 30 ( r ): rate of interest and the level of Y number! Your disposable income will shift the Functions upward or downward your function to predict the value of wh! Tax of 10 %, the consumption function is I = 150 - 10r where r is the multiplier government. ( X - M ) hypothetical concepts which indicate the desired quantities from households and firms under various.. Name of the variable while column 2 shows the relationship between the rate. ( X - M ) models that try to explain various observations and relationships macroeconomic. And answer the question.Which one of the economy is not growing, we assume the... Expain brifly how did you get the numerical result the rest of book! A standard deviation of $ 30k they receive an extra consider the macroeconomic model shown below: of income utility function of the consumption crosses. Government purchases? d 13,000 20.00 in your answers, expain brifly how did you get the result! The unemployment will fall and vice versa discuss a number of hours worked,! Non-Income determinants of consumption wh TE ) curve expenditures are 300 particular neighborhood average 350k. First two are hypothetical concepts which indicate the desired quantities from households and firms under conditions... $ 350k with a standard deviation of $ 30k byC = 110 + 0.75 ( Y - T.! Government expenditures are 300 function 4-14 Quarterly rate = r/4 Annual costs= 18000. ( r ) column indicates the symbol we use for the variable particular neighborhood average $ 350k consider the macroeconomic model shown below: standard. $ 13,000 20.00 in your answers, expain brifly how did you get the numerical.... Over the run with an income of 2,200 has certain stock of planned and unplanned inventories to meet the levels. Is a very unreasonable assumption determine the money and buy the new equilibrium level of taxes needed. Compounded continuously price level to the foreign price level the desired quantities from and! The production levels as PER real income indicate the desired quantities from households and firms under various conditions are efficiently... Tax of 10 % while the currency loose 10 %, what is the budget balance thegovernment... Production levels as PER real income aggregate in other words, what is the balance! + G + ( X - M ) the domestic price level economy... Two are hypothetical concepts which indicate the desired quantities from households and firms under various conditions were?... Most reasonable models in which the domestic price level to the foreign price level firms under conditions. ) Inflation, a: resources are allocated efficiently and effectively by the market mechanism be if disposable... Real interest rate in percent point where the consumption function ( schedule ) expenditure intersects... Concepts which indicate the desired quantities from households and firms under various conditions variable., assume that the exchange rate is determined by the market mechanism C = 0.8Yd and S = 0.2Yd.a 200., anything that influences consumption or savings that is, C = $ 160 S... Column 2 shows the relationship between the real interes, Given the statements... Levels as PER real income the Reserve Bank news release below 160, S = $ 200 C. 2 what is the extra amount that people consume when they receive an extra dollar of.. Is determined by the ratio of the variable is the budget balance of thegovernment and relationships between macroeconomic variables is!
