Knowee
Questions
Features
Study Tools

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?

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?

🧐 Not the exact question you are looking for?Go ask a question

Solution

The question is asking for the value of Y, which in this context is the equilibrium level of income in an economy. This can be calculated using the formula for the equilibrium level of income in a simple Keynesian model:

Y = C + I + G

where: Y = equilibrium level of income C = consumption I = investment G = government purchases

The consumption function is given by:

C = Co + c(Y - T)

where: Co = autonomous consumption (the spontaneous portion of consumption) c = marginal propensity to consume Y = income T = taxes

Substituting the given values into the consumption function:

C = 100 + 0.9(Y - 400)

Substituting C, I, and G into the equilibrium level of income formula:

Y = [100 + 0.9(Y - 400)] + 200 + 500

Solving for Y:

Y = 800 + 0.9Y - 360

0.1Y = 440

Y = 4400

So, the equilibrium level of income (Y) is 4400.

This problem has been solved

Similar Questions

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.

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?

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

Assume that the level of autonomous consumption in an economy equals 600, the level of planned investment = 500.What is the level of consumption when the level of income equals 3,200?

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

1/3

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.