Exam 3B: Problem Questions. Answer all parts to all three questions

Question 1:Consumption and Savings Functions (Show your work)

Disposable Income	Consumption	Saving
0	400
2000
	1600

a) Please complete the table above (assume linear functions).

b) How much is Autonomous Consumption, Autnomous Savings, mpc, mps,

c) Write out the consumption function and the savings function.

d) Please graph the consumption and savings schedules (graphs) for this question.

e) For an increase in disposable income of $3000, using the mpc, show five rounds of consumption and increases in planned expenditure.

Question 2:Planned expenditure function question with zero taxation

Do all parts to the question (show your work)

Assume in Macroland, MPC = 0.75, and autonomous consumption = $7000. Planned investment = $3000, and planned government purchases = $6000. All planned expenditure are autonomous expenditures. Taxes ( T) is = zero, and net exports = zero. Show your work

1. Write out the consumption function
2. What is induced consumption in this model?
3. Write out the planned expenditure function (Pe) (show your work)
4. Calculate equilibrium real current GDP (income) (show your work)
5. How much is the expenditure multiplier?
6. If at the current level of equilibrium, the economy is experiencing an inflationary gap $3000. How much is the full employment GDP?
7. How much does planned investment change to close the inflationary gap?
8. Graph the planned expenditure function. Show the change (shift) for a change in investment to close the gap. Show equilibrium points, full-employment GDP, Pe points. Label all points clearly

Question 3:Planned expenditure function question with lump-sum tax

Do all parts to the question (show your work)

Assume in Toyland, MPC = 0.8, and autonomous consumption = $10000.

Planned investment = $8000, and planned government purchases = $9000. All Planned I and G are autonomous expenditures. Taxes ( T) is =4000, and net exports = zero.

1. Write out the consumption function
2. Write out the planned expenditure function (show your work)
3. Calculate current equilibrium real current GDP (income) (show your work)
4. How much is the net tax multiplier
5. At the current level of equilibrium, the economy is experiencing a recessionary gap $6000. How much is the full employment GDP?
6. How much will Toyland, change lump sum tax to close the recessionary gap?
7. Write out the new planned expenditure function to reflect the change in lump sum taxes
8. Graph the planned expenditure function. Show the change (shift) for a change to close the gap.Show equilibrium points, full-employment GDP, Pe points. Label all points clearly