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Skip to main contentcloseHomework Help is Here – Start Your Trial Now!arrow_forwardSEARCHHomework help starts here!ASK AN EXPERTASKBusinessEconomicsWhat is the value of the marginal propensity to consume (MPC) in this model? (2) What is the value of the multiplier in this economy? (3) Calculate aggregate spending in this economy (2) Calculate the equilibrium level of output. (3) Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)What is the value of the marginal propensity to consume (MPC) in this model? (2) What is the value of the multiplier in this economy? (3) Calculate aggregate spending in this economy (2) Calculate the equilibrium level of output. (3) Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)BUYENGR.ECONOMIC ANALYSIS 14th EditionISBN: 9780190931919Author: NEWNANPublisher: Oxford University Pressexpand_less1 Making Economics Decisions2 Estimating Engineering Costs And Benefits3 Interest And Equivalence4 Equivalence For Repeated Cash Flows5 Present Worth Analysis6 Annual Cash Flow Analysis7 Rate Or Return Analysis7A Difficulties In Solving For An Interest Rate8 Chossing The Best Alternative9 Other Analysis Techniques9A Investing For Retirement And Other Future Needs10 Uncertainty In Future Events10A Diversification Reduces Risk11 Depreciation12 Income Taxes For Corporations12A Taxes And Personal Financial Decision Making13 Economic Life And Replacement Analysis14 Inflation And Price Change15 Selection Of A Minimum Attractive Rate Of Return16 Economic Analysis In The Public Sector17 Accounting And Engineering EconomyA Introduction To SpreadsheetsB Time Value Of Money Calculations Using Spreadsheets And CalculatorsC Compound Interest TableD Fundamentals Of Engineering (fe) Exam Practice Problemsexpand_moreChapter Questionsexpand_moreProblem 1QTCProblem 2QTCProblem 1PProblem 2PProblem 3PProblem 4PProblem 5PProblem 6PProblem 7PProblem 8PProblem 9PProblem 10PProblem 11PProblem 12PProblem 13PProblem 14PProblem 15PProblem 16PProblem 17PProblem 18PProblem 19PProblem 20PProblem 21PProblem 22PProblem 23PProblem 24PProblem 25PProblem 26PProblem 27PProblem 28PProblem 29PProblem 30PProblem 31PProblem 32PProblem 33PProblem 34PProblem 35PProblem 36PProblem 37PProblem 38PProblem 39PProblem 40PProblem 41PProblem 42PProblem 43PProblem 44PProblem 45PProblem 46PProblem 47PProblem 48PProblem 49PProblem 50PProblem 51PProblem 52PProblem 53PProblem 54PProblem 55PProblem 56PProblem 57PProblem 58PProblem 59PProblem 60PProblem 61PProblem 62PProblem 63PProblem 64PProblem 65PProblem 66PProblem 67PProblem 68PProblem 69PProblem 70Pformat_list_bulletedSee similar textbooks

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Question 1

(14 marks)

Consider the following numerical example of the simple Keynesian model with no government spending, taxes or a foreign sector (all figures in R millions):

            C   =   100 + 0,9Y

            I    =   50

 

Answer the following questions.

• What is the value of the marginal propensity to consume (MPC) in this model? (2)
• What is the value of the multiplier in this economy? (3)
• Calculate aggregate spending in this economy (2)
• Calculate the equilibrium level of output. (3)
• Suppose the level of output that creates full employment (Yf) in the economy is 1 800. Determine the level of investment spending that would create full employment in this economy. (4)

 

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• The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income.   Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What does consumption equal when income equals 600? Group of answer choices a. 324 b. 374 c. 540 d. 104arrow_forward2arrow_forwardIn the Keynesian cross model, assume that the consumption function is given by C = 20 + 0.8(Y- T). Planned investment is 200; government purchases and taxes are both 400. There is no foreign trade. An economist has claimed that the full employment level of output is 2,400. How much should the government expenditure or taxes rise or fall to achieve full employment?arrow_forward
• Discuss the multiplier effect including a description of what it describes in macroeconomic terms, how it is determined and an illustration of how it is defined.arrow_forwardAssume the following information for an economy:     Natural level of output = $190b     Autonomous consumption = 50     Total investment = 16     Government expenditure = 19     Autonomous taxation = 20     Marginal propensity to consume = 0.6 Based on this information answer the following questions: b)  Calculate the output ratio for the economy.arrow_forwardMacroeconomics: Assuming marginal propensity to consume is 0.5. If there is a shock to the economy that increases investment spending by 200 billion dollars what will the total Change to GDP be? (Ignore taxes and imports)arrow_forward
• Consider the Keynesian Liquidity Constrained consumer (LCC). • (viii) What is the marginal propensity to consume out of temporary income? What does it depend on? (ix) What is the marginal propensity to consume out of permanent income? Does it depend on the same factors you mentioned in the previous question?arrow_forwardWe know the following about a closed economy: (Y-T), • Consumption: C = 20 + 0.7 • Investment: I = 4c Government expenditures: G= 30 • Taxes: T = 0.2Y   When the government increases its expenditures without changing the way it collects taxes, there is a multiplier effect. What is the value of the multiplier? Select one (two digits after the decimal): a. 2.33 b. 2.50 c. 3.33 d. 4.00arrow_forwardThe graph below shows a 45°-line (Keynesian cross) diagram. The economy is currently in macroeconomic equilibrium at output level Yo. Suppose that investment increases. 1) Use the line tool to show a possible position for the new aggregate expenditures line. Label this line AE2. Note: if you are not prompted for a label, you have used the wrong drawing tool. 2) Use the point drawing tool to show the new equilibrium levels of GDP and expenditures.Label this point 'B'. Real aggregate expenditures, AE Real GDP, Y Y = AE AE0 Qarrow_forward
• Suppose the marginal propensity to consume equals 0.8 (i.e., c1 = 0.8). Given this information, which of the following events will cause the largest increase in output? Select one or more:   a. Public spending, G, increases by 200   b. real GDP was larger than nominal GDP from 2002 to 2008 Public spending, G, increases by 150   c. Investment, I, increases by 150   d. Taxes, T, decrease by 200arrow_forwardConsider a closed economy. Let Y denote GDP, C denotes Consumption, I denotes Investment, r is the real rate of interest in percent, T denotes Taxes, and G stands for Government Spending. Suppose that these take the following form: Y = 8,000.C = 600 + 0.8(Y – T) I = 2,000 – 100rT = 500G = 500. a. What is the marginal propensity to consume in this economy? b. What are the equilibrium values of C, I, and r? c. What are the values of private saving, public saving, and national saving? d. If government spending rises to 1,000, what are the new equilibrium values of C, I, and r? e. What are the new equilibrium values of private saving, public saving, and national saving?arrow_forwardQuestion Suppose that the marginal propensity to consume is 0.75 and the total change in real GDP is $100, what must have been the initial change in aggregate expenditures? Provide your answer below:arrow_forward

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