ECO 205 Principles of Macroeconomics
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ECO 205. Principles of Macroeconomics
Assignment 7. Due 11/22/2017 (or as soon as possible after the break).
Question 1. Consumption
The Keynesian cross for a representative household is given in the figure below.
The marginal propensity to consume is 0.9. Tax rate is 35%. There is no depreciation or indirect taxes.
(a) How much does the household spend when it has no disposable income?
(b) How much does the household spend if its per capita GDP (the sum of wages and rent) is $55000? Does it break even (disposable income = C)?
(c) Suppose saving behavior is promoted among the population. What does the value of MPC have to become in order for a household to break even at the national income per capita of $55000?
Question 2. Spending multiplier.
The elements of expenditure are as follows:
Investment is I = 3500
Government spending is G = 5000
Net exports are NX = 0
Starvation-level consumption is s.l.c. = 4000
Furthermore,
Income tax rate is τ = 45%
GDP = 18000
The economy is in equilibrium.
(a) Find the value of autonomous spending.
(b) Find the value of the spending multiplier.
(c) What is the MPC in this country?
Question 3. Equilibrium in the Keynesian Cross
The elements of expenditure are fixed:
Investment is I = 3500
Government spending is G = 5000
Net exports are NX = 0
Starvation-level consumption is s.l.c. = 4000
Furthermore,
The spending multiplier is 1.6
and the output is GDP = 22000
(a) How do output and expenditure compare? What does that imply for the firms’ inventories? Are they increasing, decreasing, or remaining the same?
(b) Illustrate with the Keynesian Cross how the economy will converge to equilibrium in the fixed-price environment if no government intervention happens.
(c) Suppose the government decides to offset the business cycle by increasing the public spending, G. Find by how much G has to increase in order to set the equilibrium at output=expenditure=22000.
4
Grading Rubrics
| Critical Elements | Distinguished (100%) | Proficient (85%) | Basic (70%) | Below Expectations (50%) | Non-Performance (0%) |
| Thesis Statement | Raises the strongest objection to the thesis presented in the assignment. The objection is strongly grounded in research and logical reasoning. | Raises a plausible objection to the thesis presented in the assignment. The objection is mostly grounded in research and logical reasoning.
| Raises an objection to the thesis presented in the assignment. The objection is somewhat grounded in research and logical reasoning. | Attempts to raise an objection to the thesis presented in the assignment. The objection is minimally grounded in research and logical reasoning.
| The objection to the thesis is either nonexistent or lacks the components described in the assignment instructions. |
| Counter Argument | Provides a strong, thorough rebuttal to the objection. The rebuttal effectively demonstrates that the thesis can withstand the objection and applies the principles of charity and accuracy.
| Provides a rebuttal to the objection. The rebuttal mostly demonstrates that the thesis can withstand the objection and mostly applies the principles of charity and accuracy.
| Provides a limited rebuttal to the objection. The rebuttal somewhat demonstrates that the thesis can withstand the objection and somewhat applies the principles of charity and accuracy.
| Attempts to provide a rebuttal to the objection; however, the rebuttal minimally demonstrates that the thesis can withstand the objection and does not apply the principles of charity and accuracy.
| The rebuttal is either nonexistent or lacks the components described in the assignment instructions. |
| Conclusion | – Provides clear and concise closing remarks that comprehensively summarize the essay. The remarks consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem.
| Provides closing remarks that summarize the essay. The remarks mostly consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are somewhat unclear.
| Provides closing remarks that minimally summarizes the essay. The remarks minimally consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problems. The closing remarks are unclear and/or vague.
| Attempts to provide closing remarks that summarize the essay, however, the remarks do not consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are unclear and vague. | The closing remarks are either nonexistent or lack the components described in the assignment instructions.
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| Written Communication: Context of and Purpose for Writing
| Demonstrates methodical application of organization and presentation of content. The purpose of the writing is evident and easy to understand. Summaries, quotes, and/or paraphrases fit naturally into the sentences and paragraphs. Paper flows smoothly.
| Demonstrates sufficient application of organization and presentation of content. The purpose of the writing is, for the most part, clear and easy to understand. There are some problems with the blending of summaries, paraphrases, and quotes. Paper flows somewhat smoothly. | Demonstrates a limited understanding of organization and presentation of content in written work. The purpose of the writing is somewhat evident but may not be integrated throughout the assignment. There are many problems with the blending of summaries, paraphrases, and quotes. Paper does not flow smoothly in all sections.
| Organization and presentation of content are extremely limited. The purpose of the writing is unclear. There is little or no blending of summaries, paraphrases, and quotes. Paper does not flow smoothly when read.
| The assignment is either nonexistent or lacks the components described in the instructions.
|
| Written Communication: Control of Syntax and Mechanics
| – Displays meticulous comprehension and organization of syntax and mechanics, such as spelling and grammar. Written work contains no errors and is very easy to understand.
| Displays comprehension and organization of syntax and mechanics, such as spelling and grammar. Written work contains only a few minor errors and is mostly easy to understand | Displays basic comprehension of syntax and mechanics, such as spelling and grammar. Written work contains a few errors which may slightly distract the reader.
| Fails to display basic comprehension of syntax or mechanics, such as spelling and grammar. Written work contains major errors which distract the reader.
| The assignment is either nonexistent or lacks the components described in the instructions.
|
| Written Communication: Required Formatting
| Accurately uses required formatting consistently throughout the paper, title page, and reference page.
| Exhibits required formatting throughout the paper. However, layout contains a few minor errors. | Exhibits limited knowledge of required formatting throughout the paper. However, layout does not meet all requirements.
| Fails to exhibit basic knowledge of required formatting. There are frequent errors, making the layout difficult to distinguish as required style.
| The assignment is either nonexistent or lacks the components described in the instructions.
|
| Written Communication: Word Requirement
| The length of the paper is equivalent to the required number of words. | The length of the paper is nearly equivalent to the required number of words.
| The length of the paper is equivalent to at least three quarters of the required number of words. | The length of the paper is equivalent to at least one half of the required number of words.
| The assignment is either nonexistent or lacks the components described in the instructions.
|
| Written Communication: Resource Requirement | Uses more than the required number of scholarly sources, providing compelling evidence to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.
| Uses the required number of scholarly sources to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.
| Uses less than the required number of sources to support ideas. Some sources may not be scholarly. Most sources on the reference page are used within the body of the assignment. Citations may not be formatted correctly. | Uses an inadequate number of sources that provide little or no support for ideas. Sources used may not be scholarly. Most sources on the reference page are not used within the body of the assignment. Citations are not formatted correctly.
| The assignment is either nonexistent or lacks the components described in the instructions. |
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