Homework Answers
IF the pending multiplier in the economy is 10 then any increase or decrease in the expenditure will affect the economy 10 times.
a) This will shift the aggregate expenditure line above, aggregate demand curve to the right and increase the real GDP by $80 billion.
b) IF spending fall then AE line will shift downward, AD curve will shift to the left and the real GDP will fall by $50 billion.
c) if spending rise by $ 20 billion then AE curve will shift upward, AD curve to the right and Real GDP will increase by 200 billion.
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Response Questions Part A To C Assume the simple spending multiplier equals 10. Determine the size...
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Response Questions Part A To B A) Use Your Own Words For Your Response: What is the relationship between demand side economics and the budget deficit? B) For each of the following values for the MPC, determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion decrease in spending: a. MPC = 0.9- b. MPC = 0.75– c. MPC = 0.6 –
For each of the following values for the MPC, determine the size of the simple spending...
For each of the following values for the MPC, determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion decrease in spending: 1. MPC = 0.9 - 2. MPC = 0.75 - 3. MPC = 0.6 -
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household...
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending Initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4 a. If household wealth falls by 4 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve...
If the spending multiplier equals 5 and equilibrium income is $2 billion below potential GDP. then...
If the spending multiplier equals 5 and equilibrium income is $2 billion below potential GDP. then other things being equal, to reach the potential real GDP level. autonomous spending needs to increase by $0.1 billion nominal GDP needs to increase by $1.2 billion autonomous spending needs to decrease by $6 billion nominal GDP needs to decrease by $12 billion autonomous spending needs to increase by $0.4 billion
1. Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in...
1. Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the econo- my's multiplier is 4. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand...
10. Suppose that consumer spending initially rises by 7 billion for every 1 percent rise in...
10. Suppose that consumer spending initially rises by 7 billion for every 1 percent rise in household wealth and that investment spending initially rises (or falls) by 20 billion for every percentage point fall (rise) in the real interest rate. Also, assume the economy's multiplier is 5. a. If household wealth rises by 5% and the real interest rate increases by 1%, by how much would aggregate demand initially shift at each price level? By how much and in which...
7. Equilibrium GDP on the demand side occurs when a. total spending equals total production, and...
7. Equilibrium GDP on the demand side occurs when a. total spending equals total production, and inventories are zero. b. total spending equals total production, and inventories remain at desired levels. c. total spending exceeds total production, and inventories are rising. d. total spending is less than total production, and inventories are falling. For the next four questions refer to the following equations: C = 50+ 0.8 Y I= 100 8. The equilibrium level of GDP in this economy is:...
What is the spending multiplier if the MPC is 62%? 1.61 .62 2.63 Unlike the neoclassical...
What is the spending multiplier if the MPC is 62%? 1.61 .62 2.63 Unlike the neoclassical approach to the economy, the Keynesian approach focuses on sticky prices and aggregate demand. This focus is advantageous for understanding the reason cyclical unemployment and recessions occur, as these fluctuations take place in the ________ -run. long gap short What is true about the expenditure multiplier? GDP does not change proportionally. GDP changes when the aggregate expenditure changes. A larger change in expenditure causes...
14000 Aggregate Expenditures when P= 100 12000 10000 8000 Planned Aggregate Expenditure (AE) - 6000 -- 4000 - - 2000 07...
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Macroeconomic Multiple Choice Questions Answer All 10 Questions* 1) If the Central Bank of Kuwait puts...
Macroeconomic Multiple Choice Questions
Answer All 10 Questions*
1) If the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at full employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is...
Response Questions Part A To B A) Use Your Own Words For Your Response: What is the relationship between demand side economics and the budget deficit? B) For each of the following values for the MPC, determine the size of the simple spending multiplier and the total change in real GDP demanded following a $10 billion decrease in spending: a. MPC = 0.9- b. MPC = 0.75– c. MPC = 0.6 –
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending Initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4 a. If household wealth falls by 4 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve...
If the spending multiplier equals 5 and equilibrium income is $2 billion below potential GDP. then other things being equal, to reach the potential real GDP level. autonomous spending needs to increase by $0.1 billion nominal GDP needs to increase by $1.2 billion autonomous spending needs to decrease by $6 billion nominal GDP needs to decrease by $12 billion autonomous spending needs to increase by $0.4 billion
1. Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the econo- my's multiplier is 4. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand...
10. Suppose that consumer spending initially rises by 7 billion for every 1 percent rise in household wealth and that investment spending initially rises (or falls) by 20 billion for every percentage point fall (rise) in the real interest rate. Also, assume the economy's multiplier is 5. a. If household wealth rises by 5% and the real interest rate increases by 1%, by how much would aggregate demand initially shift at each price level? By how much and in which...
7. Equilibrium GDP on the demand side occurs when a. total spending equals total production, and inventories are zero. b. total spending equals total production, and inventories remain at desired levels. c. total spending exceeds total production, and inventories are rising. d. total spending is less than total production, and inventories are falling. For the next four questions refer to the following equations: C = 50+ 0.8 Y I= 100 8. The equilibrium level of GDP in this economy is:...
14000 Aggregate Expenditures when P= 100 12000 10000 8000 Planned Aggregate Expenditure (AE) - 6000 -- 4000 - - 2000 07 O 2000 4000 6000 8000 10000 12000 14000 Real GDP (Y) Aggregate Demand 140 Price Level 120 0 2000 4000 6000 8000 1000012000140001600018000 In the figures above, if autonomous spending rises for any reason other than a decrease in the price level, then: The Aggregate Expenditure curve will shift down and there will be a downward movement along the...
Macroeconomic Multiple Choice Questions
Answer All 10 Questions*
1) If the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at full employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is...
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