Homework Answers
Solution:
a. Green line is aggregate demand curve and blend line is aggregate supply curve.
b. The equilibrium price level is 110 and real GDP is 900.
C. At price level of 100, firms are willing to supply 825 and desired expenditure is 1000 . This is a disequilibrium Condition where there is excess demand of 175 and upward pressure on price level to reach equilibrium.
d. At price level of 120, firms are willing to supply 975 and desired expenditure is 825. This is a disequilibrium condition Where there is excess supply of 150 and downward pressure on price level to reach equilibrium.
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The economy of Neverland has the following AD and AS schedules. Denote Yad as the level...
14. Consider the following sets of values for MPC, t, and m, and recall that the...
14. Consider the following sets of values for MPC, t, and m, and recall that the simple multiplier is given by 1/[1 – MPC (1 – t) – m). Assume the AS curve is upward sloping and identical in each economy. Economy A: MPC =0.84, t = 0.15, m=0.19 Economy B: MPC =0.84, t = 0.40, m=0.19 Economy C: MPC =0.93, t = 0.15, m=0.12 Economy D: MPC = 0.75, t = 0.30, m=0.27 Economy E: MPC = 0.75, t...
Econ Question
The equations for the AD and AS curves are given by: AD : YAD = 710 − 30P + 5G AS : YAS = 10 + 5P − 2Poil where Y is real GDP, P is the price level, G is the government purchases, and Poil is the world price of oil. a) What is the value of the simple multiplier? b) Write down the equilibrium condition. c) Solve for the equilibrium value of real GDP and the price level...
The following table shows alternative hypothetical economies and the relevant values for the marginal propensity to...
The following table shows alternative hypothetical economies and the relevant values for the marginal propensity to consume out of disposable income (MPC), the net tax rate (t), and the marginal propensity to import (m). a. Recall that z, the marginal propensity to spend out of national income, is given by the simple expression Z-MPC(1-1)-m. By using this expression, compute z and the simple multiplier for each of the economies and fill in the table. (Round your response to two decimal...
1. The diagram below shows an AD/AS model for a hypothetical economy. The economy begins in...
1. The diagram below shows an AD/AS model for a hypothetical economy. The economy begins in long-run equilibrium at point A. Price Level - AD, -t-AD₂ 1250 700 800 900 1000 Real GDP C. Describe a plausible economic event (ie. Shock) that could have shifted the AD curve from AD1 to AD2? D. Please describe the adjustment process that would return the economy to its long-run equilibrium following the negative aggregate demand shock shown in the diagram.
The graph shows an economy that is above full employment. To restore full employment, the government...
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
Please answer these macro multiple choices Which of the following is a defining characteristic of the...
Please answer these macro multiple choices
Which of the following is a defining characteristic of the AD/AS macro model in the short run? O A. firms cannot operate near their normal capacity O B. technology used in production is endogenous and variable O C. factor supplies are assumed to be constant OD. the level of potential output fluctuates with the price level O E. factor prices are assumed to be constant Assume the economy is initially in equilibrium with desired...
only b, d, e, and f. thanks ! Using the what do we call such an...
only b, d, e, and f. thanks !
Using the what do we call such an output gap! This question involves algebraically solving the system of two equations given by the AD and AS curves. The equations for the curves are given by AD: YAD = 710 - 30P + 5G AS: YAS = 10 + 5P - 2POIL where Y is real GDP, P is the price level, G is the level of government purchases, and Poil is the...
Assume the economy as reflected in the equilibrium point of AD/AS is at full employment GDP...
Assume the economy as reflected in the equilibrium point of AD/AS is at full employment GDP at an output of $17 trillion Consumer confidence has increased with news of large stock market gains. As a result, $ 1 trillion dollars of spending increases from consumers. What happens initially to AD and what is the level of output now? Assuming a mpc of 0.8, what will happen to real GDP after all rounds of spending have been completed? Show your calculation...
An economy has a fixed price level, no imports, and no income taxes. MPC is 0.50.5,...
An economy has a fixed price level, no imports, and no income taxes. MPC is 0.50.5, and real GDP is $250250 billion. Businesses increase investment by $55 billion. Calculate the multiplier and the change in real GDP. The multiplier is nothing. The increase in real GDP is $nothing billion.
The graph shows an economy below full employment. To restore full employment, the government incr...
The graph shows an economy below full employment. To restore full employment, the government increases government expenditure by $0.5 trillion. Draw a curve to show the effect of the increase if it is the only change in spending plans. Label the curve ADo AE Price level (GDP price index, 2009-100) Potential GDP The increase in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD,...
14. Consider the following sets of values for MPC, t, and m, and recall that the simple multiplier is given by 1/[1 – MPC (1 – t) – m). Assume the AS curve is upward sloping and identical in each economy. Economy A: MPC =0.84, t = 0.15, m=0.19 Economy B: MPC =0.84, t = 0.40, m=0.19 Economy C: MPC =0.93, t = 0.15, m=0.12 Economy D: MPC = 0.75, t = 0.30, m=0.27 Economy E: MPC = 0.75, t...
The following table shows alternative hypothetical economies and the relevant values for the marginal propensity to consume out of disposable income (MPC), the net tax rate (t), and the marginal propensity to import (m). a. Recall that z, the marginal propensity to spend out of national income, is given by the simple expression Z-MPC(1-1)-m. By using this expression, compute z and the simple multiplier for each of the economies and fill in the table. (Round your response to two decimal...
1. The diagram below shows an AD/AS model for a hypothetical economy. The economy begins in long-run equilibrium at point A. Price Level - AD, -t-AD₂ 1250 700 800 900 1000 Real GDP C. Describe a plausible economic event (ie. Shock) that could have shifted the AD curve from AD1 to AD2? D. Please describe the adjustment process that would return the economy to its long-run equilibrium following the negative aggregate demand shock shown in the diagram.
The graph shows an economy that is above full employment. To restore full employment, the government decreases government expenditure by $0.5 trillion. Draw a curve to show the effect of the decrease if this is the only change in spending plans. Label the curve AD0-ΔE The decrease in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD Draw a point at the full-employment equilibrium...
Please answer these macro multiple choices
Which of the following is a defining characteristic of the AD/AS macro model in the short run? O A. firms cannot operate near their normal capacity O B. technology used in production is endogenous and variable O C. factor supplies are assumed to be constant OD. the level of potential output fluctuates with the price level O E. factor prices are assumed to be constant Assume the economy is initially in equilibrium with desired...
only b, d, e, and f. thanks !
Using the what do we call such an output gap! This question involves algebraically solving the system of two equations given by the AD and AS curves. The equations for the curves are given by AD: YAD = 710 - 30P + 5G AS: YAS = 10 + 5P - 2POIL where Y is real GDP, P is the price level, G is the level of government purchases, and Poil is the...
The graph shows an economy below full employment. To restore full employment, the government increases government expenditure by $0.5 trillion. Draw a curve to show the effect of the increase if it is the only change in spending plans. Label the curve ADo AE Price level (GDP price index, 2009-100) Potential GDP The increase in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD,...
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