Let Government purchases and taxes be 500 and 400 respectively ,investment is 200 ,and the spontaneous portion of consumption is 100 , marginal consumption trend is 0.9 ,which is the value of Y?A.4400B.3800C.4000D.4200
Question
Let Government purchases and taxes be 500 and 400 respectively ,investment is 200 ,and the spontaneous portion of consumption is 100 , marginal consumption trend is 0.9 ,which is the value of Y?A.4400B.3800C.4000D.4200
Solution
In this case, we can use the formula for the equilibrium level of income (Y) in a simple Keynesian model, which is:
Y = C + I + G
where: C is consumption, I is investment, and G is government purchases.
Consumption (C) is determined by the equation:
C = autonomous consumption + (marginal propensity to consume * Y)
where: autonomous consumption is the spontaneous portion of consumption, and marginal propensity to consume is the marginal consumption trend.
Given that the spontaneous portion of consumption is 100 and the marginal consumption trend is 0.9, we can substitute these values into the equation for C to get:
C = 100 + 0.9Y
We can then substitute this equation for C, along with the given values for I (200) and G (500), into the equation for Y to get:
Y = (100 + 0.9Y) + 200 + 500
Solving this equation for Y gives:
0.1Y = 800
Y = 800 / 0.1
Y = 8000
However, this value is not among the options provided. It's possible there may be a mistake in the question or the options. Please check the values and try again.
Similar Questions
With the Consumption function: C=200+ 0.75(Y-T) and each of G, I and T being 100 what is the value of the Government purchase Multiplier?
Assume that the level of autonomous consumption in an economy equals 400, the level of planned investment = 400.Calculate the marginal propensity to consume, if the level of income equals 2,000?Provide answer to one decimal point.
The monthly income of Ranjith is Rs. 28000 and his savings is Rs.Y. When his monthly income is increased by 20% and expenditure is decreased by 10%, then his savings become Rs. 19200. What is the value of Y?Marks : 2Negative Marks : 0Answer hereRs.8000Rs.10000Rs.12000Rs.14000
Use the following information of a hypothetical economy to answer this question: National Income (Y) = 5,200; Government Budget Deficit = 150; Disposable Income (Yd) = 4,400; and Consumption (C) = 4,100. The value of Investment (I) is Group of answer choices 150 260 270 280 none of the above
In an economy, the consumption function is C = 500 + 0.75Y , (where C is consumption expenditureand Y is income. Calculate the equilibrium level of income and consumption expenditure, wheninvestment expenditure is 5,000
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.