Homework Answers
Ans1) the correct option is a) demand pull inflation
Ans2) the correct option is d) household increase their consumption spending
Ans3) the correct option is c) $1,000
Increase in aggregate demand = 1/(1-0.9) * 100 = 1000
Ans4) the correct option is -7
Spending multiplier is 8 so 1/(1- MPC) = 8 implies MPC = 7/8
Tax multiplier is -MPC / (1-MPC) = -7
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Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30.
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Note: There is only one correct option. 1. To get the equilibrium level of income in...
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Consider a hypothetical closed economy in which households spend$0.70 of each additional dollar they earn...
Consider a hypothetical closed economy in which households spend
$0.70 of each additional dollar they earn and save the remaining
$0.30.The marginal propensity to consume (MPC) for this economy is
_____, and the expenditure multiplier for this economy is
_____.Suppose the government in this economy decides to decrease
government purchases by $300 billion. The decrease in government
purchases will lead to a decrease in income, generating an initial
change in consumption equal to _____. This decreases income yet
again, causing...
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Note: There is only one correct option.
1. To get the equilibrium level of income in the simple Keynesian model [1] we multiply the autonomous aggregate spending by the multiplier 12 we add all the autonomous aggregate spending component and subtract the multiplier [3] we divide the multiplier by aggregate demand [4] we multiply the interest rate by the multiplier 2. An increase in the tax rate in the Keynesian model will 1 shift the aggregate spending curve upwards in...
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Consider a hypothetical closed economy in which households spend
$0.70 of each additional dollar they earn and save the remaining
$0.30.The marginal propensity to consume (MPC) for this economy is
_____, and the expenditure multiplier for this economy is
_____.Suppose the government in this economy decides to decrease
government purchases by $300 billion. The decrease in government
purchases will lead to a decrease in income, generating an initial
change in consumption equal to _____. This decreases income yet
again, causing...
Product 13) 13) The gap that exists when equilibrium real Gross Domestic (GDP) is greater than full employment real Gross Domestic Product (GDP) is called a(n) A) demand gap. C) recessionary gap B) employment gap D) inflationary gap 14) 14) Economic growth will NOT result in inflation if aggregate demand shifts A) outward to the right at the same speed as aggregate supply B) outward to the right as aggregate supply shifts inward to the left. C) inward to the...
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