Q#1: [40 pts] (a) Draw an AS/AD graph. Assume that in your graph GDP* = 1,000 (million) and inf* = 8%. Put these values on your graph. If this graph represents the US economy, explain what major problem you see with this equilibrium. (b) Assume that mpc = 0.90 and the US government is considering two options for economic policy [see below]. Draw a graph for each option. Show the change in equilibrium and label the now
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- An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services. 1.1 (a)Determine the equilibrium level of income/ output. (b) Illustrate the aggregate spending curve and equilibrium level of income on a diagram. (c) Determine the surplus/ deficit in the government budget at equilibrium.(d) Determine trade balance at equilibrium. (e) Find the multiplier applicable to autonomous tax and interpret it.1.2 (a)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s:(i)GDP/ output (ii)Balance of trade (iii)Government budgetAn open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services. (a) Determine trade balance at equilibrium. (b) Find the multiplier applicable to autonomous tax and interpret it. (c)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s: (i)GDP/ output (ii)Balance of trade (iii)Government budgetAssume an economy where spending for each sector is: Household: C = 800 + 0.95Q Business: I = 3000 Public: G = 4000, Tr = 7000, Tx = 1000 + 0.3Q Foreign: X = 1700, Im = 200 + 0.165Q Solve for Consumption Expenditure, Household Savings, Imports https://www.bartleby.com/questions-and-answers/assume-an-economy-where-spending-for-each-sector-is-household-c-800-0.95q-business-i-3000-public-g-4/849c5d9a-4bb7-48c4-8b89-ccc576cdc909
- Use the information in the table to answer the questions that follow. (Hint: Assume this is a closed economy without an international sector; thus, X - M=0. Also assume that there is no government spending in this economy.) Level of Employment (Millions of workers) 40 45 50 55 60 65 70 The equilibrium level of real GDP in this economy is S Employment, Output, Consumption, and Investment Real GDP (Output) Equals Disposable Income (Billions of dollars) 325 45 50 55 70 375 425 60 65 475 525 575 If the full-employment output level is $525 billion, the economy is experiencing 625 billion. 425 Employment, Output, Consumption, and Investment Level of Employment Real GDP (Output) Equals Disposable Income (Millions of workers) (Billions of dollars) 40 325 375 475 525 575 Consumption (Billions of dollars) 300 625 325 350 375 400 425 450 Use the information in the next table to answer the questions that follow. (Hint: Assume this is a closed economy without an international sector; thus, X- M =…Is a family a household? Is a household a family? Which sector (Households, Businesses, or International) spends the most? Which sector spends the least? Which sector, because of its volatility, has an importance greater than is warranted by its size? What does it mean if net exports are negative? People sometimes argue that imports should be limited by government policy. Suppose a government quota on the quantity of sugar to be imported to the United States occurs. What is likely to happen to the price of sugar in the United States and in the rest of the world? List the four sectors of the economy along with the type of spending associated with each sector. Order the types of spending in terms of magnitude, and give an example of each kind of spending. Using the interconnection between sectors of the economy, explain the effects of imposing an increase in taxes on the household sector.The national income (Y) of a country has the form: Y = 0.48K0.4L0.3NX0.01 Where: K is capital, L is labor and NX is net exports. a) How will a 1% increase in labor affect income? Is there an opinion that reducing the labor rate by 2% can increase net exports by 15% while keeping income unchanged, is this true or false? b) Let NX's growth rate be 4%, K is 3%, L is 5%. Determine the growth rate of Y.
- The Wakandan GDP for the year 2040 was $87,000. Government expenditures were $29,000 and investment was $6,000. They exported $15,000 worth of vibranium and imported $14,000 worth of coffee beans. If these are the only relevant transactions, what is the value of government spending? Round to two decimal places. Do not enter the currency symbol, but enter the negative sign if appropriate. If your answer is -$1.125, enter -1.13. 29,000Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate spending line is graphed against the 45° line. Suppose that, in this country, there is an autonomous increase in aggregate spending of $20 billion. Show this change on the graph. Planned aggregate spending (billions of dollars) 200 180 160 140 120 100 80 60 40 20 0 0 20 45 degree line 40 60 80 100 120 140 Real GDP (billions of dollars) Planned AB 160 180 200 What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign.Consider the following hypothetical data for the U.S. economy in 2018 (all amounts are in trillions of dollars; see pages 179–182).Consumption 11.0 Indirect business taxes .8 Depreciation 1.3 Government spending 3.8 Imports 2.7 Gross private domestic investment 4.0 Exports 2.5e. Based on the data, what is GDP? NDP? NI?f. Suppose that in 2019, exports fall to $2.3 trillion, imports rise to $2.85 trillion, and gross private domestic investment falls to $3.25 trillion. What will GDP be in 2019, assuming that other values do not change between 2018 and 2019?
- For the next three questions, consider a closed economy with the following information: Economic investment = $4500 • Private savings = $3000 Output (income) = $16,000 • Consumption = $11,000 This economy has no transfer payments; in other words, total taxes and "net taxes" are the same thing. Carefully following all numeric instructions, calculate this economy's government purchases (G).Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate spending line is graphed against the 45° line. Suppose that, in this country, there is an autonomous increase in aggregate spending of $20 billion. Show this change on the graph. Planned aggregate spending (billions of dollars) 88 89 288898 200 180 160 140 120 100 60 40 0 20 40 60 80 100 120 140 45 degree line Planned AB 160 180 200Using the ZZ(The line ZZ represents the demand for domestic goods (including exports) and NX graphs, illustrate graphically and explain what effect a reduction in foreign output (Y*) will have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria.