Simple national income

decision theory

MACROECONOMIC
EQUILIBRIUM
 Tasks for determining aggregate demand and aggregate
supply
Task 1
Problem statement: household consumption Expenditure
is 960 USD Government expenditure (GNP) is 270 USD
Import is 70, export – 75 USD Investment costs to expand
the business – 246 USD, depreciation is 140 USD
Determine the total demand.
The technology of solving the problem: the calculation of total
demand is carried out according to the formula:
AD = Consumer spending + Gross business investment
spending + government procurement of goods and services +
Net exports of goods and services = C + Inv + G + Xn
 Task 2
Consumption is given by the function: C = 1000 + 0,8YV (YV –
disposable national income), investments are equal to 2000 USD,
net export-300 USD Determine the aggregate demand in the
economy, if a national income of 10 000 USD is created, and taxes
are equal to government spending and amount to 1200 USD
The technology of solving the problem: the Total demand is determined
by the formula: AD = Consumer spending + Gross investment costs of
business + public procurement of goods and services + Net exports of
goods and services = C + Inv + G + Xn.
In order to determine consumption, it is first necessary to determine
disposable national income. To do this, the national income created in the
economy, exempt from taxes:………………...
Substituting the values in the formula AD, we obtain:
AD = …………………..
 Task 3
Consumption is given by the function: C = 2000 + 0.75YV (YV
– disposable national income), investments are equal to 5200
USD, net exports-700 USD, public procurement of goods and
services is 0.15Y Determine the total demand in the economy,
if the national income is created in the amount of 30 000 USD,
and taxes are 7500 USD
Technology to solve the problem: First determine the disposable
national income, national income created in the economy is clear
from the taxes: ……………….. As a result, the consumption function is
written as a formula: ………………………….. Hence, consumption equals
………………..Then you can define public expenditure on GNP:……………….
Substitute the values in the formula AD: AD = Consumer spending
+ Gross investment expenditure of business + public procurement of
goods and services + Net exports of goods and services = C + Inv +
G + Xn = ……………………………
 Task 4
Consumption is given by the function: C = 0.85YV (YV –
disposable national income), investments are equal to 3400
USD, net exports – 400 USD, public procurement of goods
and services is 0.1Y. Determine the total demand in the
economy, if a national income of 20 000 USD is created, and
taxes are equal to 0.2Y.
The technology of solving the problem: first, we determine the
available national income. To do this, the national income created
in the economy, are exempt from taxes: ……………………. As a result,
consumption will be: C = ……………………………….then you can
determine the public expenditure on GNP:………………………….
Substitute the values in the formula AD: AD = Consumer
spending + Gross investment expenditure of business + public
procurement of goods and services + Net exports of goods and
services = C + Inv + G + Xn = ………………………………….
 Task 5
Consumption is given by the function: C = 13 500 + 0,7YV (YV –
disposable national income), investments are 6000 USD, net exports –
1000 USD, public procurement of goods and services is 0,2Y. Created a
national income of 100 000 USD, taxes are 20 000 USD Determine the
total demand and how it will change if consumers prefer to consume
2000 USD less at each level of income.
The technology of solving the problem: first, we determine the available
national income. To do this, the national income created in the economy, are
exempt from taxes: ………………………….. As a result, the consumption function is
written as a formula: C = …………………………... Hence, consumption equals
……………….. USD you can Then determine public expenditure on
GNP:……………………….
Substituting the values in the formula AD, we find the initial aggregate
demand: AD = Consumer spending + Gross investment costs of business +
public procurement of goods and services + Net exports of goods and services
= C + Inv + G + Xn = ……………………………….USD
Changes in consumption will also change aggregate demand. Consumer
spending is now equal to: C = ……………………………..USD and aggregate demand:
AD = …….............USD that is, the aggregate demand will decrease by
……………. USD
Answer: will be reduced by …………………….. USD
 Task 6
Consumption function is given by: C = 2000 + 0,8 Уv (Уv – disposable
national income), investment is equal to 3200 USD, net exports – USD
500, government purchases of goods and services to be 0.1Y. Created a
national income of USD 50,000 and taxes equal to 0.25Y. Determine the
aggregate demand and how it will change if state expenditures will
increase to 0.15Y.

Technology to solve the problem: First defined consumption:

C = ……………………………..USD you can Then determine public
expenditure on GNP: G = …………………….USD
Substitute the values in the formula AD: AD = Consumer spending + Gross
investment spending business + public procurement of goods and services +
Net exports of goods and services = C + Inv + G + Xn = ………………… USD
If a function of government spending will change, you will change the
aggregate demand. Government spending will now be: G1 = ………………,
and AD = ……………………………………..USD Therefore, aggregate demand
increased by …………………………….USD
 Task 7
Consumption is given by the function C = 10 000 + 0,75Yv (Yv –
disposable national income), investments are equal to 7000 us
dollars, net exports-800 us dollars., public procurement of goods
and services is 0.15Y. in the economy created a national income of
60 000 us dollars, taxes are 0.3Y. Determine the aggregate demand.
What will it be like if taxes rise to 0.4Y?
The technology of solving the problem: Determine the initial value of
aggregate demand by the formula AD = Consumer spending + Gross
investment costs of business + public procurement of goods and services +
Net exports of goods and services = C + Inv + G + NX = .....................
The growth of taxes will lead to changes in consumption. Consumer
spending with the growth of taxes will be reduced to C = ………………………….
as a Result, aggregate demand will also decrease:= ……………………….thus, the
aggregate demand will decrease by …………………. USD.
Answer: AD1 = ………………………, AD2 = ……………………..USD
Task 8
The economy is described by the following data: GDP = C + I, C = 100 + 0.8 × GDP, I = 50. Determine:
the equilibrium level of income; the equilibrium volume of savings and consumption; what will be the
unplanned increase in inventories, if the level of output is 800? How will the equilibrium output change
if the investment increases to 100? What is the value of the total cost multiplier?
The initial equilibrium release level can be found by solving the equation
GDP = C + I = ……………...
After algebraic transformations, we have the value of the equilibrium output 750.
In equilibrium, the equality of savings and investment is observed, i.e. the equilibrium level of savings is equal
to:
S = I = 50.
The equilibrium level of consumption is:
C = GDP – S = ……………………...
The equilibrium level of consumption can be found from the function of consumption after the substitution of
the equilibrium income in it:
C = …………………………….
If the actual output is 800 and the equilibrium is 750, then the unplanned increase in product inventories will
be:
………………………………..
If the investment increases from ……… to ……………, the planned expenditure curve will move up and the output
will increase by a factor of:
ΔGDP = ΔI × M,
where ΔGDP – growth equilibrium release, ΔI – the rate of investment, M is the multiplier of total
expenditures.
The equilibrium output will be:
GDPe.o. = 100 + 0.8 × GDP + 100,
GDPe.o. = …...
Increase in equilibrium output:
ΔGDP……….
Total cost multiplier:
M =ΔGDP / ΔI