General Business 765 Student Name ________________________
Spring 2002 ID Number __________________________
Homework #3
General Instructions: For this homework you will need to attach your work indicating how you found your answers. It is fine for you to record your answers in the blanks given on this sheet, however you will need to indicate how you found your answers in order to get full credit.
Year |
Population |
Employment |
Labor Productivity |
Total Output |
Population Growth Rate (relative to prior year) |
Growth rate of output (relative to prior year) |
Direction of change in average standard of living |
1997 |
10 |
5 |
$10,000 |
|
X |
X |
X |
1998 |
12 |
6 |
$11,000 |
|
|
|
|
1999 |
14 |
7 |
$11,200 |
|
|
|
|
2000 |
15 |
8 |
$11,400 |
|
|
|
|
2001 |
15 |
8 |
$11,800 |
|
|
|
|
Fill in the table above.
The following abbreviations are used in the table:
Y = aggregate production
T = autonomous taxes
YD = disposable income
C=consumption spending
I = investment spending
G = government spending
X – M = net export spending
AE= aggregate expenditure
Y (1) |
T (2) |
YD (3) |
C (4) |
I (5) |
G (6) |
X-M (7) |
AE (8) |
Direction of Change in Aggregate Production (9) |
Inventory Change (10) |
100 |
|
90 |
|
|
|
|
250 |
|
|
|
|
|
160 |
|
100 |
|
|
|
|
600 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
Decrease |
30 |
In the table you will get 1 point for your answers for columns 5,6, and 7; 1 point each for your answers to columns 1, 2, 3, 4, 8, 9, and 10. For the rest of the questions in this problem, each answer is worth two points.
a. What is the value of autonomous consumption with respect to disposable income? ___________________
b. What is the value of autonomous consumption with respect to aggregate income? _____________
c. What is the equilibrium level of output for this economy? _____________
d. What is the equation for savings with respect to disposable income? __________________
e. What is the level of savings when
a. Aggregate income equals 200? ____________
b. Aggregate income equals 500? ____________
c. Aggregate income equals aggregate expenditure? ____________
f. If employment is equal to 20% of aggregate income, then what is the level of employment in this economy when the economy is in equilibrium? ___________________
g. If the government would like employment to equal 200 people, what must the equilibrium level of aggregate output equal? _____________
h. If the government wishes to achieve the level of output found in (g),
a. How much would government spending need to change by in order to reach this level of output, holding everything else constant? ______________
b. How much would taxes need to change by in order to reach this level of output, holding everything else constant? ____________
c. If the government were to reach this level of output by changing both taxes and government spending by an equivalent amount (a balanced budget proposal), how much would taxes and government spending need to change by (hold everything else constant)? ____________