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# ECO 403 MACROECONOMICS Assignment NO. 2 Discussion and Solution Due Date: 02 February, 2016

MACROECONOMICS (ECO 403)
ASSIGNMENT # 02

Marks 10                                                                               DUE DATE: 02 FEBRUARY, 2016

GRACE PERIOD: AVAILABLE

The Case:

Brazil, an economy in South American region, is growing rapidly. One of the reasons of this growth is exploration of natural resources like gold, iron ore, manganese, nickel, phosphates, platinum, tin, uranium, petroleum, hydropower and many others. Major industries based on these natural resources are promoting business environment which help to create macroeconomic stability. Government of Brazil wants to analyze the macroeconomic stability of the economy. Aggregate expenditures are important part of macroeconomic analysis. Aggregate expenditures of Brazil economy are consisting of expenditures by household, business and government. These expenditures are also known as ‘Planned Expenditures’. It can be denoted in an equation as:

Planned Aggregate Expenditures = AE = C + I + G

Keeping in view the above scenario of Brazil economy where Keynesian cross analysis will apply. Consumption function of Brazil economy is given by an equation:

C = 450 + 0.5(Y-T)

Where

. 0.5 is MPC
. Y represents income = Actual Expenditures
. T shows taxes

We Assume

. Income = Actual Expenditures = Y = 1500
. Planned investment = I = 200
. Government Expenditure = G = 200
. Taxes = T = 200

Requirements:

Keeping in view the above Scenario and given information of Brazil Economy,
Calculate the following:
1. Consumption Level (C)
2. Planned Aggregate Expenditures (AE)
3. Government Purchases Multiplier, if MPC is 0.5
4. Tax Multiplier, if MPC is 0.5

Marks: (2.5+2.5+2.5+2.5)

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### Replies to This Discussion

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

The Case:
Brazil, an economy in South American region, is growing rapidly. One of the
reasons of this growth is exploration of natural resources like gold, iron ore,
manganese, nickel, phosphates, platinum, tin, uranium, petroleum, hydropower
and many others. Major industries based on these natural resources are
promoting business environment which help to create macroeconomic stability.
Government of Brazil wants to analyze the macroeconomic stability of the
economy. Aggregate expenditures are important part of macroeconomic analysis.
Aggregate expenditures of Brazil economy are consisting of expenditures by
household, business and government. These expenditures are also known as
‘Planned Expenditures’. It can be denoted in an equation as:
Planned Aggregate Expenditures = AE = C + I + G

Keeping in view the above scenario of Brazil economy where Keynesian cross
analysis will apply. Consumption function of Brazil economy is given by an
equation:
C = 450 + 0.5(Y-T)
Where
 0.5 is MPC
 Y represents income = Actual Expenditures
 T shows taxes

We Assume
 Income = Actual Expenditures = Y = 1500
 Planned investment = I = 200
 Government Expenditure = G = 200
 Taxes = T = 200

Requirements:
Keeping in view the above Scenario and given information of Brazil Economy,
Calculate the following:
1. Consumption Level (C)
2. Planned Aggregate Expenditures (AE)
3. Government Purchases Multiplier, if MPC is 0.5
4. Tax Multiplier, if MPC is 0.5

Marks: (2.5+2.5+2.5+2.5)

Is assignment  ka solution lecture no 26 me hey right?   tax multiplier key formuly sy tax multiplier ajaigaa baki ka koi betady  plzzz

kindly send solution through tax multiplier method...at least discussion tou start ho jayay ge...plz

MACROECONOMICS (ECO 403)

ASSIGNMENT # 02

Hakim Zeeshan (MC-150200141)

Requirements:

Keeping in view the above Scenario and given information of Brazil Economy,

Calculate the following:

1. Consumption Level (C)

2. Planned Aggregate Expenditures (AE)

3. Government Purchases Multiplier, if MPC is 0.5

4. Tax Multiplier, if MPC is 0.5

1. Consumption Level = C

= C (Y-T)

450+0.5 (1500-200)

450 + 650

1100

C = 1100

2. PAE = C + I + G

1100 + 200 + 200

1500

PAE = 1500

3. GPM, if MPC = 0.5

= 1/1.MPC

2

GPM = 2

4. Tax Multiplier

= -MPC/1-MPC

-0.5/1-0.5

1

Tax multiplier = 1

­

Remember me in your prayers :)

thnx

no thanx bro

zeeshan bro love u but i think there is a little amendment in part three whose formula is written wrong

Y/T = 1/1.MPC =2

Y= 2G

SO I THINK ANSWER IS 2G NOT 2

WHAT DO U SAY

ANS 4 IS ALSO WRONG, IT SHOULD BE -1

yes it should be -1.. written by mistake :)

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