Question #996

Is it true of false? why?

& If the real interest rate on government debt is equal to the growth rate of real GDP, reductions in the debt-to-GDP ration require the governmnet to run primary budget surpluses.&

& ---------------------------------------------------------------&

& You are given the following expenditure functions.&

Consumption, c=30+0.9DI&

Investment, I=40&

Government, G=20&

Taxes, T=0.2Y&

Exports, X=20&

Imports, IM=0.12Y&

& Assume the aggregate price level remains constant.&

a. what is the equation of the aggregate expenditure function?plot it in a diagram.

what is the total autonomous expenditure in the economy?&

& b.what is the slope of the AE function?how does the slope change when

1. MPC changes

2. the tax rate changes

3. marginal propensity to import changes&

& c. calculate the equilibrium level of real national income&

d. what is the multiplier? &

e. suppose that the government decides to increase G by 10. What will be the effect of this on equilibrium national income?

& If the real interest rate on government debt is equal to the growth rate of real GDP, reductions in the debt-to-GDP ration require the governmnet to run primary budget surpluses.&

& ---------------------------------------------------------------&

& You are given the following expenditure functions.&

Consumption, c=30+0.9DI&

Investment, I=40&

Government, G=20&

Taxes, T=0.2Y&

Exports, X=20&

Imports, IM=0.12Y&

& Assume the aggregate price level remains constant.&

a. what is the equation of the aggregate expenditure function?plot it in a diagram.

what is the total autonomous expenditure in the economy?&

& b.what is the slope of the AE function?how does the slope change when

1. MPC changes

2. the tax rate changes

3. marginal propensity to import changes&

& c. calculate the equilibrium level of real national income&

d. what is the multiplier? &

e. suppose that the government decides to increase G by 10. What will be the effect of this on equilibrium national income?

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