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Old 03-03-2002, 23:44:42   #1
*End Is Forever*
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I Suck At Economics (II)

Ummm...

1. Consider simple Keynesian GDP determination with
Consumption function: C = 10 + 0.7Y
National income identity: Y = C + l + G

(a) If l = 10 and G = 20, solve for Y.
(b) What is the multiplier?
(c) If G increases to 30 by how much will Y increase?
(d) Draw a diagram showing your solution to (c)
(e) Explain why this solution can be interpreted as satisfying the equilibrium condition: aggregate demand (AD) equals aggregate supply (AS).

2. Suppose now that the government balances its budget by using tax revenue T to pay for its expenditure and the consumption function is C = 10 + 0.7(Y - T)

(a) If l = 20 and G = 20 solve again for Y
(b) What is the multiplier?
(c) If G increases to 30 by how much will Y increase now?
(d) Explain briefly why the answer to 2(c) differs from that for 1(c) and what the implications are for fiscal policy.


Last edited by *End Is Forever*; 03-03-2002 at 23:48:04.
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Old 03-03-2002, 23:46:39   #2
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no, evil!
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Old 03-03-2002, 23:48:49   #3
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I lost the formulas when I copied them... they're there now, but you never noticed.
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Old 03-03-2002, 23:50:04   #4
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ahh well, now it makes a little more sense...
(yes i did try to make something out of your post first...)
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Old 03-03-2002, 23:50:56   #5
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Isn't that simply basic math?
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Old 03-03-2002, 23:51:54   #6
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No, it's COBOL math.
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Old 03-03-2002, 23:53:23   #7
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a)
Y = (10 + 0.7Y) + 10 + 20
=>
Y=40/0.3
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Old 03-03-2002, 23:54:13   #8
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5 sec to do the math 60 to make the post...
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Old 04-03-2002, 09:42:36   #9
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Yeah, what you really suck at is maths.
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Old 04-03-2002, 09:46:00   #10
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Pretty straightforward stuff.

But don't worry real ecxonomists never use that rubbish.
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Old 04-03-2002, 09:48:12   #11
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Quote:
Originally posted by Resource Consumer
Pretty straightforward stuff.

But don't worry real ecxonomists never use that rubbish.
Real exoconomists use kitty livers.
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Old 04-03-2002, 11:24:51   #12
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b)
c) increase to 50/0.3 ie by a factor of 1.25
d) =
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Old 04-03-2002, 13:19:58   #13
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Old 04-03-2002, 13:42:53   #14
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1. Consider simple Keynesian GDP determination with
Consumption function: C = 10 + 0.7Y
National income identity: Y = C + l + G

(a) If l = 10 and G = 20, solve for Y.

As has been said:

Y= 10 + 0.7Y +10 +20
Y=40/.3

(b) What is the multiplier?

For government spending ? I never understood this kenesian stuff, but I think it's supposed to be 1/(1-c), ie 1/0.3.

Accordingly you get in c)

Y= 10 + 0.7Y +10 +30
Y= 50/0.3

So the increase of 10 in G gets an incrase in Y of 10*1/0.3 - which is - oh wonder - the multiplier effect predicted under (b).

And now, do the second part yourself, you lazy tory whiner...
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Old 04-03-2002, 13:47:04   #15
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Or find a 12 year old and slip it into their maths homework.
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Old 04-03-2002, 13:50:47   #16
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Well he'd still have to figure out the multiplier. And this ain't a math qeustion either:

"(d) Explain briefly why the answer to 2(c) differs from that for 1(c) and what the implications are for fiscal policy."

But he could ask Venom about that. (now THERE's an insult that should get even Iain from his sorry ass)
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Old 04-03-2002, 13:59:47   #17
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It's simple though isn't it?
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Old 04-03-2002, 14:07:37   #18
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It says so:

"Consider simple Keynesian GDP determination..."

So it has to be....

Apart from it all being nonsense, the math is simple.
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Old 04-03-2002, 14:09:37   #19
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I seem to remember some of that from GCSE Economics but mostly I sat at the back talking because it was boring.
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Old 04-03-2002, 16:24:35   #20
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Perhaps I should have entitled this "Iain is a lazy bastard (II)"...?
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Old 04-03-2002, 16:26:01   #21
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"Perhebs" ?

Obviously, rather.
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