Homework Answers
the economy is in equiibrium where AE line cuts the 45 degree line hence here the equilibrium real gdp is $80 billion
at the level of equilibrium GDP planned investment=actual investment hence the planned investment=(C+I)-C=70-60=$10 billion
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o Consider the figure to the right. This economy is in macroeconomic equilibrium at what level...
The graph models an economy in equilibrium with a real GDP of $180 billion. Suppose that...
The graph models an economy in equilibrium with a real GDP of $180 billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment to increase by $30 billion. Shift the planned agregate expenditure (AE) line to show the effect of this change. Planned aggregate spending (billions of dollars) 0 30 240 270 300 60 90 120 150 180 210 Real GDP billions of dollars) Planned aggregate spendin 0 30 60 90 120 150 180 210 Real GDP...
1. Suppose below diagram illustrates the aggregate expenditure function of an economy. a. What is the...
1. Suppose below diagram illustrates the aggregate expenditure function of an economy. a. What is the value of the equilibrium output in this economy? b. What is the value of the MPC according to the aggregate expenditure function? c. What is the value of the multiplier? d. What is the unplanned change in inventory when the real GDP is $15 billion? e. Suppose the economy is producing the macroeconomic equilibrium output level. If there is an increase in autonomous expenditure...
The graph to the right shows a 45°-line (Keynesian cross) diagram. The economy is currently in...
The graph to the right shows a 45°-line (Keynesian cross) diagram. The economy is currently in macroeconomic equilibrium at output level Y. Real aggregate expenditures, AE Y = AE Suppose that the price level decreases. 1) Use the line tool to show a possible position for the new aggregate expenditures line. Label this line AE,. AEO Note: if you are not prompted for a label, you have used the wrong drawing tool. 2) Use the point drawing tool to show...
Application: (20 points) The Expenditure-Output Model below shows a hypothetical economy in the short run. Use...
Application: (20 points) The Expenditure-Output Model below shows a hypothetical economy in the short run. Use the information in the diagram to answer the questions that follow Aggregate Expenditures (5 billions) 210 45°-line AE =C+I+G+ NX Consumption Function 30 0 30 60 90 120 150 180 210 Real GDP ($ billions) (A) (2 points) What is the equilibrium level of Real GDP in this economy? (B) Suppose this economy initially had produced a Real GDP level of $30 billion. (a)...
2. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so...
2. Algebra of the income-expenditure model Consider a small economy that is closed to trade, so that its net exports are zero. Suppose that the economy has the following consumption function, where C is consumption, Y is income (real GDP), IP is planned investment, G is government purchases, and T is taxes: C = $45 billion+0.75×(Y – T) Suppose G=$60 billion, IP=$60 billion, and T=$20 billion. Given the consumption function and the fact that, in a closed economy, planned expenditure...
The graph below shows an economy in macroeconomic equilibrium. Suppose there is a reduction in the...
The graph below shows an economy in macroeconomic equilibrium. Suppose there is a reduction in the amount of federal grants to local and state governments. All else equal, illustrate the effect of this contractionary fiscal policy on macroeconomic equilibrium. Provide your answer below: Price Level Aggregate Supply Aggregate Demand Real GDP
decrease in personal taxes from $100 billion to 580 billion will increase real GDP 11. If...
decrease in personal taxes from $100 billion to 580 billion will increase real GDP 11. If the MPC -0.75, a decrease in person by A) $20 billion. B) $40 billion. C) $60 billion. D) $80 billion. Table 10.1 Consumption C - $1.0+ 0.80YD Investment $1.5 Government purchases $2.2 Net exports Taxes Government transfer payments $0 (all values are in billions of dollars) 2, 12. Refer to Table 10.1. Equilibrium real GDP for this economy is equal to A) $5.75 billion....
At point a in the graph to the right, planned aggregate expenditure is At point A...
At point a in the graph to the right, planned aggregate
expenditure is
At point A in the graph to the right planned aggregate expenditure is GDP. At point B, planned aggregate expenditure is GDP. At point, planned aggregate expenditure is GDP. At point A, the unintended change in inventories can be shown on the graph by: Real aggregate expenditure, AE O A. the horizontal distance between point A and point B. OB. the vertical distance between point A and...
9. Refer to the below table. For the open economy, the equilibrium GDP is domestic output...
9. Refer to the below table. For the open economy, the equilibrium GDP is domestic output AE, closed economy exports imports 200 230 30 20 250 270 30 20 300 310 30 20 350 350 30 20 400 390 30 20 450 430 30 20 500 470 30 20 A) $300 B) $350 C) $400 D) $450 10. If net exports decline from zero to some negative amount, the aggregate expenditures schedule would A) shift upward B) shift downward C)...
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real income and planned expenditure equal to $100...
Consider two closed economies that are identical except for
their marginal propensity to consume (MPC). Each economy is
currently in equilibrium with real income and planned expenditure
equal to $100 billion, as shown by the black points on the
following two graphs. Neither economy has taxes that change with
income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial planned
expenditure line has a slope of 0.5 and passes through the...
The graph models an economy in equilibrium with a real GDP of $180 billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment to increase by $30 billion. Shift the planned agregate expenditure (AE) line to show the effect of this change. Planned aggregate spending (billions of dollars) 0 30 240 270 300 60 90 120 150 180 210 Real GDP billions of dollars) Planned aggregate spendin 0 30 60 90 120 150 180 210 Real GDP...
1. Suppose below diagram illustrates the aggregate expenditure function of an economy. a. What is the value of the equilibrium output in this economy? b. What is the value of the MPC according to the aggregate expenditure function? c. What is the value of the multiplier? d. What is the unplanned change in inventory when the real GDP is $15 billion? e. Suppose the economy is producing the macroeconomic equilibrium output level. If there is an increase in autonomous expenditure...
The graph to the right shows a 45°-line (Keynesian cross) diagram. The economy is currently in macroeconomic equilibrium at output level Y. Real aggregate expenditures, AE Y = AE Suppose that the price level decreases. 1) Use the line tool to show a possible position for the new aggregate expenditures line. Label this line AE,. AEO Note: if you are not prompted for a label, you have used the wrong drawing tool. 2) Use the point drawing tool to show...
Application: (20 points) The Expenditure-Output Model below shows a hypothetical economy in the short run. Use the information in the diagram to answer the questions that follow Aggregate Expenditures (5 billions) 210 45°-line AE =C+I+G+ NX Consumption Function 30 0 30 60 90 120 150 180 210 Real GDP ($ billions) (A) (2 points) What is the equilibrium level of Real GDP in this economy? (B) Suppose this economy initially had produced a Real GDP level of $30 billion. (a)...
The graph below shows an economy in macroeconomic equilibrium. Suppose there is a reduction in the amount of federal grants to local and state governments. All else equal, illustrate the effect of this contractionary fiscal policy on macroeconomic equilibrium. Provide your answer below: Price Level Aggregate Supply Aggregate Demand Real GDP
decrease in personal taxes from $100 billion to 580 billion will increase real GDP 11. If the MPC -0.75, a decrease in person by A) $20 billion. B) $40 billion. C) $60 billion. D) $80 billion. Table 10.1 Consumption C - $1.0+ 0.80YD Investment $1.5 Government purchases $2.2 Net exports Taxes Government transfer payments $0 (all values are in billions of dollars) 2, 12. Refer to Table 10.1. Equilibrium real GDP for this economy is equal to A) $5.75 billion....
At point a in the graph to the right, planned aggregate
expenditure is
At point A in the graph to the right planned aggregate expenditure is GDP. At point B, planned aggregate expenditure is GDP. At point, planned aggregate expenditure is GDP. At point A, the unintended change in inventories can be shown on the graph by: Real aggregate expenditure, AE O A. the horizontal distance between point A and point B. OB. the vertical distance between point A and...
Consider two closed economies that are identical except for
their marginal propensity to consume (MPC). Each economy is
currently in equilibrium with real income and planned expenditure
equal to $100 billion, as shown by the black points on the
following two graphs. Neither economy has taxes that change with
income. The grey lines show the 45-degree line on each graph.The first economy's MPC is 0.5. Therefore, its initial planned
expenditure line has a slope of 0.5 and passes through the...
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