Homework Answers
Answer:
1]
GDP(Y) = C + I +G + (X – M)
Y = 50 + 0.80 Yd +30 + 20 + (15-20)
Y = 50 + 0.80 (Y – Taxes) + 30 + 20 -5
Y = 50 + 0.80 (Y – 10) + 45
Y = 50 + 0.80Y – 8 + 45
0.2Y = 87
Y = 435
Hence Correct option: D] 435
2]
Consumption C = 50 + 0.8Yd = 50 + 0.8(Y – Taxes) = 50 + 0.8(435 – 10) = 390
Correct option: B] 390
3]
MPC = Change in consumption / change in income(Y) = (300-120)/(300 – 100) = 180/200
MPC = 0.90
MPS = 1 – MPC = 1-0.90 = 0.10
Hence correct option: B] 0.90, 0.10
4]
Correct option:
a. equilibrium price levels rise; the new level of real GDP is indeterminate.
When Aggregate Demand increases and Aggregate Supply decreases the equilibrium price will be increasing.
Change in GDP depends on the increase or decrease in Aggregate Demand and Aggregate Supply. Then real GDP is calculated by excluding the inflationary effects on the nominal GDP.
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