An economy's consumption function is depicted in the table below.
Disposable Income (Y Sd)($, billions): 0, 100, 200, 300, 400, 500
Planned Investment($, billions): 20, 20, 20, 20, 20, 20
Consumption($, billions): 100, 180,260, 340, 420, 500
Government Spending($, billions): 10, 10, 10, 10, 10, 10
Net Exports($, billions): 20, 20, 20, 20, 20, 20
Taxes($, billions): 10, 10, 10, 10, 10,10
a. When disposable income is equal to $200
billion total planned expenditures equal
Part 3
A.
$20
billion.
B.
$260
billion.
C.
$310
billion.
D.
$200
billion.
The correct answer is D. $200 billion.
When disposable income is equal to $200 billion, the consumption expenditure is also equal to $200 billion, since the consumption function represents the relationship between disposable income and consumption. In this case, the planned investment is $20 billion, government spending is $10 billion, and net exports are $20 billion. Therefore, the total planned expenditures would be $250 billion ($200 billion consumption + $20 billion investment + $10 billion government spending + $20 billion net exports).
the answer is 310
Apologies for the confusion. Based on the given information, if disposable income is equal to $200 billion, the consumption is $260 billion, planned investment is $20 billion, government spending is $10 billion, and net exports is $20 billion.
Therefore, the total planned expenditures would be $310 billion ($260 billion consumption + $20 billion investment + $10 billion government spending + $20 billion net exports).
Thus, the correct answer is C. $310 billion.
why tax doen't count in the calculation?
Apologies for the oversight. You are correct that taxes should be considered in the calculation of total planned expenditures.
If disposable income is equal to $200 billion, and taxes are $10 billion, then the disposable income after taxes (Yd) would be $190 billion ($200 billion - $10 billion).
Given that planned investment is $20 billion, government spending is $10 billion, net exports is $20 billion, and consumption is determined by the consumption function, we can calculate the total planned expenditures as follows:
Total Planned Expenditures = consumption + investment + government spending + net exports
Total Planned Expenditures = Consumption(Yd) + Investment + Government Spending + Net Exports
Total Planned Expenditures = $260 billion + $20 billion + $10 billion + $20 billion
Therefore, the correct answer is C. $310 billion.
b. Therefore, in this model when investment, government spending and net exports are included, and the disposable income is $200
billion, unplanned inventory is valued at
Part 5
A.
$20
billion.
B.
negative 0.30
.
C.
$negative 100
billion.
D.
$negative 60
billion.
To calculate the unplanned inventory, we need to compare the total planned expenditures with the actual level of output. Total planned expenditures include consumption, investment, government spending, and net exports.
Given that the total planned expenditures are $310 billion (as calculated in the previous response), and the planned investment is $20 billion, government spending is $10 billion, and net exports are $20 billion, we can calculate the unplanned inventory as follows:
Unplanned Inventory = Total Planned Expenditures - Planned Investment - Government Spending - Net Exports
Unplanned Inventory = $310 billion - $20 billion - $10 billion - $20 billion
Unplanned Inventory = $260 billion
Therefore, the unplanned inventory when disposable income is $200 billion would be equal to $260 billion.
So, the correct answer is C. $negative 100 billion. Note that negative values indicate a surplus in inventory, which suggests that suppliers have produced more than the actual demand.