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28 Sep 2019

# The following is a model of a closed economy with nogovernment.

C = 44 + 0.6YD I = 12

where C = desired consumption expenditure (in billions of $), YD =disposable

income (in billions of $), and I = desired investment expenditure(in billions

of $).

a) What is autonomous C equal to?

b) What is induced C equal to if national income (Y) is 120?

c) What would happen to C if Y increased by 10?

d) What is the saving function equal to?

e) How can private saving (S) be negative? Explain.

f) What would happen to S if Y increased by 10?

g) At what level of Y is the average propensity to consume (APC)equal to 1?

h) How does the APC change as Y increases?

i) How does the average propensity to save (APS) change as Yincreases?

j) What is aggregate expenditure function equal to?

k) Is the economy in equilibrium when Y is 150? If no, then by howmuch are

the economyâs inventories changing?

l) What are the equilibrium levels of Y, C, S, and YD?

m) At equilibrium, what do the injections and the withdrawals inthis

economy equal?

n) Give two reasons why investment would change from I = 12 to I =18.

o) What are the new equilibrium levels of Y, C, S, and YD ifinvestment

changed from I = 12 to I = 18?

p) What is the size of the (simple) multiplier?

q) What is the change in Y in the 3rd round of the multipliereffect as a

result of the change in investment in part n?

The following is a model of a closed economy with nogovernment.

C = 44 + 0.6YD I = 12

where C = desired consumption expenditure (in billions of $), YD =disposable

income (in billions of $), and I = desired investment expenditure(in billions

of $).

a) What is autonomous C equal to?

b) What is induced C equal to if national income (Y) is 120?

c) What would happen to C if Y increased by 10?

d) What is the saving function equal to?

e) How can private saving (S) be negative? Explain.

f) What would happen to S if Y increased by 10?

g) At what level of Y is the average propensity to consume (APC)equal to 1?

h) How does the APC change as Y increases?

i) How does the average propensity to save (APS) change as Yincreases?

j) What is aggregate expenditure function equal to?

k) Is the economy in equilibrium when Y is 150? If no, then by howmuch are

the economyâs inventories changing?

l) What are the equilibrium levels of Y, C, S, and YD?

m) At equilibrium, what do the injections and the withdrawals inthis

economy equal?

n) Give two reasons why investment would change from I = 12 to I =18.

o) What are the new equilibrium levels of Y, C, S, and YD ifinvestment

changed from I = 12 to I = 18?

p) What is the size of the (simple) multiplier?

q) What is the change in Y in the 3rd round of the multipliereffect as a

result of the change in investment in part n?

C = 44 + 0.6YD I = 12

where C = desired consumption expenditure (in billions of $), YD =disposable

income (in billions of $), and I = desired investment expenditure(in billions

of $).

a) What is autonomous C equal to?

b) What is induced C equal to if national income (Y) is 120?

c) What would happen to C if Y increased by 10?

d) What is the saving function equal to?

e) How can private saving (S) be negative? Explain.

f) What would happen to S if Y increased by 10?

g) At what level of Y is the average propensity to consume (APC)equal to 1?

h) How does the APC change as Y increases?

i) How does the average propensity to save (APS) change as Yincreases?

j) What is aggregate expenditure function equal to?

k) Is the economy in equilibrium when Y is 150? If no, then by howmuch are

the economyâs inventories changing?

l) What are the equilibrium levels of Y, C, S, and YD?

m) At equilibrium, what do the injections and the withdrawals inthis

economy equal?

n) Give two reasons why investment would change from I = 12 to I =18.

o) What are the new equilibrium levels of Y, C, S, and YD ifinvestment

changed from I = 12 to I = 18?

p) What is the size of the (simple) multiplier?

q) What is the change in Y in the 3rd round of the multipliereffect as a

result of the change in investment in part n?

lalithashwin156Lv10

1 May 2023

Joshua StredderLv10

28 Sep 2019

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