Section B (40 marks) Attempt all questions. Question 1 (15 marks) The economy of Melvis Pink...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Section B (40 marks) Attempt all questions. Question 1 (15 marks) The economy of Melvis Pink in the early 1970's, was a simple closed economy rich in oil reserves and not much of anything else. The economic make-up of the country is given as (in billions of dollars): Autonomous consumption is $20 and Investment $5. The marginal propensity to consume is given as 0.5 Calculate the following with detailed workings [limit your answer to two decimal points]: a) The consumption function (2 marks) (3 marks) (3 marks) b) The aggregate expenditure function c) Equilibrium real expenditure d) The autonomous expenditure multiplier (3 marks) e) Suppose the economy experienced a rise in investment by $2 billion. Calculate the i. Change in real GDP (2 marks) ii. The new equilibrium level of output (2 marks) Question 2 (25 marks) Fast forward 50 years and Melvis Pink today boasts of a modern and expanding economy dependent on its exports of crude and natural gas. Its national income in 2013 was driven by the following indicators (all information is expressed in billions of dollars): Autonomous consumption $50, investment $40, government expenditure $50, autonomous taxes $10, exports $60, imports $40. A welfare state, the federal government handed out $20 billion in transfer payments in 2018. The marginal propensity to consume is 0.6. The income tax rate is 0.30. Calculate the following with detailed workings [limit your answer to two decimal points]: a) The consumption function (4 marks) (4 marks) (3 marks) b) The aggregate expenditure function c) Equilibrium real expenditure d) Aggregate Consumption (in billions of dollars) e) The autonomous expenditure multiplier 5 source was downloaded by 100000800982884 from CourseHero.com on 06-30-2023 11:42:35 GMT-05:00 (2 marks) (3 marks) w.coursehero.com/file/143209006/Macroeconomics-Take-Home-Final-Exam-Paper-ECN60204-MAR2020-cc20955fbd0223430ead19e78782f2bapdf/ f) The federal budget deficit/surplus (4 marks) g) Suppose the economy's potential real GDP is $300. Given the actual level of real GDP calculated in (c), what is the size of the economy's output gap? Indicate whether it is a recessionary gap or inflationary gap? (2 marks) h) Given the size of the output gap calculated in (g), recommend the amount of government expenditure that the government must spend in order to bring the economy back to full employment? (3 marks) Section B (40 marks) Attempt all questions. Question 1 (15 marks) The economy of Melvis Pink in the early 1970's, was a simple closed economy rich in oil reserves and not much of anything else. The economic make-up of the country is given as (in billions of dollars): Autonomous consumption is $20 and Investment $5. The marginal propensity to consume is given as 0.5 Calculate the following with detailed workings [limit your answer to two decimal points]: a) The consumption function (2 marks) (3 marks) (3 marks) b) The aggregate expenditure function c) Equilibrium real expenditure d) The autonomous expenditure multiplier (3 marks) e) Suppose the economy experienced a rise in investment by $2 billion. Calculate the i. Change in real GDP (2 marks) ii. The new equilibrium level of output (2 marks) Question 2 (25 marks) Fast forward 50 years and Melvis Pink today boasts of a modern and expanding economy dependent on its exports of crude and natural gas. Its national income in 2013 was driven by the following indicators (all information is expressed in billions of dollars): Autonomous consumption $50, investment $40, government expenditure $50, autonomous taxes $10, exports $60, imports $40. A welfare state, the federal government handed out $20 billion in transfer payments in 2018. The marginal propensity to consume is 0.6. The income tax rate is 0.30. Calculate the following with detailed workings [limit your answer to two decimal points]: a) The consumption function (4 marks) (4 marks) (3 marks) b) The aggregate expenditure function c) Equilibrium real expenditure d) Aggregate Consumption (in billions of dollars) e) The autonomous expenditure multiplier 5 source was downloaded by 100000800982884 from CourseHero.com on 06-30-2023 11:42:35 GMT-05:00 (2 marks) (3 marks) w.coursehero.com/file/143209006/Macroeconomics-Take-Home-Final-Exam-Paper-ECN60204-MAR2020-cc20955fbd0223430ead19e78782f2bapdf/ f) The federal budget deficit/surplus (4 marks) g) Suppose the economy's potential real GDP is $300. Given the actual level of real GDP calculated in (c), what is the size of the economy's output gap? Indicate whether it is a recessionary gap or inflationary gap? (2 marks) h) Given the size of the output gap calculated in (g), recommend the amount of government expenditure that the government must spend in order to bring the economy back to full employment? (3 marks)
Expert Answer:
Answer rating: 100% (QA)
a The consumption function The consumption function is given by the equation C Autonomous consumption Marginal propensity to consume Disposable income ... View the full answer
Related Book For
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn
Posted Date:
Students also viewed these finance questions
-
Compare and contrast the approaches to achieving a change of behavior outlined by Kotter & Cohen (2012). The authors stated to achieve change, one should utilize a "See-Feel-Change" method (Kotter...
-
Changes in current operating assets and liabilities-indirect method Victor Corporation's comparative balance sheet for current assets and liabilities was as follows: Accounts receivable Inventory...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
The Policy Committee of your company decides to change investment strategies. This change entails an increase in exposure to the stocks of large companies producing consumer products dominated by...
-
Elaine died on May 1, 2016. Her gross estate consisted of the following items: Cash .................................................................. $ 40,000 Stocks traded on a stock exchange...
-
In a mass-spring-dashpot system like the one in Exercise 61, the masss position at time t is Find the average value of y over the interval 0 t 2. Exercise 61 A retarding force, symbolized by the...
-
In September 2015, Boeing agreed to terms to sell 300 planes to China in one of the largest long-term airline contracts ever signed. With contracts to sell a plane, a company such as Boeing would...
-
Baker Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming income before bond interest...
-
What is Corporate Social Responsibility (CSR) and provide a specific example of a company utilizing CSR and what the company is gaining from that CSR initiative.
-
How has the study of finance changed since the beginning of the twentieth century?
-
How much of the work of computing the address of an element of an array can be performed at compile time? How much must be performed at run time?
-
DM Inc.'s outstanding, callable bonds were issued three years ago,with a coupon rate of 5%, original maturity of 25 years, par value of $1,000, call price of $1,050 and 10 years of call protection....
-
Describe the history, current status, and adoption implications of a Financial Accounting Standards Board ongoing project. Requirements The FASB has several ongoing projects that involve the review...
-
What is the difference between sunk cost and opportunity cost?
-
What are the differences between allowing a patient to die and physician-assisted suicide?
-
Sudoku company issues 3 2 0 0 0 shares 7 par value commin stock in exchangr for the land and a building. The land is valied at 2 4 3 0 0 0 and the building at 3 6 4 0 0 0 . Prepare the journal entry...
-
What is the significance of ensuring information source credibility in the examination and assessment of workplace systems?
-
Which property determines whether a control is available to the user during run time? a. Available b. Enabled c. Unavailable d. Disabled
-
Use library and Internet resources to research the names and countries of the stock exchanges on which Toyota Motor Company is listed. Write a short paper on the complexities relative to ethics of...
-
After reviewing financial results for 2010, Chicago Cannery's president sent the following e-mail to his CFO and controller, Willie Logan. Dear Willie: I'm disappointed in the financial results for...
-
Research suggests that as people work over a certain number of hours, productivity goes down, stress goes up, and results are not as good. You have taken this observation to heart and want to...
-
Which of the following techniques involves the creation and use of a pair of public and private keys? a. hashing c. symmetric encryption b. asymmetric encryption d. key escrow
-
Which of the following is a preventive control? a. penetration testing c. training b. patch management d. log analysis
-
The approach to perimeter defense that involves examining only information in the packet header of each individual IP packet is referred to as a. deep packet inspection c. stateful packet filtering...
Study smarter with the SolutionInn App