Discussions - Discuss the following with reasonable explanations:1. Refer to the accompanying figure.Planned Aggregate Expenditure, PAE4.750 PANDANGAN DAN KESINETE SINT MAARTENKE4.0003250#}#11240108$##***************3.000 4.000 5,000YPAE=1,000+ 0.75YOutput, YIBased on the Keynesian cross diagram, if output equals 5,000, what kind of output gapexists in such a situation and how do firms respond to the gap?

The potential level of output is depicted by Y*. The potential level output is 3000 (See the…

Answered: 1. Refer to the accompanying figure.…

1. Refer to the accompanying figure. Planned Aggregate Expenditure, PAE 4.750 4,000 3,250 1,000 45° 3,000 4.000 5,000 Y" PAE 1,000+0.75Y Output, Y on the Keynesian cross diagram, if output equals 5,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the following consumption function data to anwser the question bellow: Real disposable income consumption savings aMpc MPS
Aggregate Expenditures and Multipliers Assignment a. Using the aggregate expenditure function above, what is the current level of real GDP? b. Using the aggregate expenditure function above, what would be the level of real GDP if the aggregate expenditure function shifted up by $0.2T? c. If Investment expenditures increase by $300B and MPC is equal to 0.90, what will be the increase in real GDP? d. If Government expenditures increase by $800B and MPS is equal to 0.05, what will be the increase in real GDP?
Question 3 of 16 Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest to smallest. Largest MPC Smallest MPC Answer Bank Bert Doug Eli Carter Al Name Income change Consumption change Al +$5,000+$5,000 +$3,000+$3,000 Bert +$2,500+$2,500 +$800+$800 Carter +$1,000+$1,000 +$800+$800 Doug −$2,500−$2,500 −$1,750−$1,750 Eli −$5,000−$5,000 −$2,000−$2,000
2. For simplicity, we normally treat aggregate tax payments (T) as determined by politics or other factors unrelated to output. However, suppose that aggregate tax payments are proportional to income. That is, T=t·Y, where tis the marginal tax rate and is between o and 1. a. How, if at all, would this change in our assumptions affect the Keynesian cross diagram? b. Would this change increase, decrease, or have no impact on the multiplier effect, or is it not possible to tell? (That is, how would the effect of a given vertical shift of the planned expenditure line compare with what it was before?)
A fall in mps raises the GDP multiplier. O True O False
Help The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that Multiple Choice an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP a decrease in the price level shifts the aggregote expenditures schedule downward and decreases real GDP a decreose in the price level shifts the aggregate expenditures scheduie upiward and decreases real GDP an increase in the price level shifts the eggregate expenditures schedule downverd and decreases real GDP
Question Can this be explained in a simple way? Thanks The following table illustrates a few rounds of the multiplier process for a 2 sector economy for an initial increase in exogenous planned investment of 50. delta PAE 50 35 24.5 17.15 delta y 50 35 24.5 17.15 What is the approximate value of the multiplier in this economy? 1.4 2.4 3.0 3.3 0.7 The first round effect on GDP comes for the increase in exogenous investment, but the subsequent rounds depend on the amount of the additional GDP/national income that is spent. This depends on the marginal propensity to consume. In round 2 we have 35 = c times 50. So c =0.7 and the multiplier is l/(l-0.7) = 3.3333 or approximately 3.3.
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Homework: Demand-Side Equilibrium: Unemployment or Inflation? The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $650 billion. REAL EXPENDITURE (Billions of dollars) § 2 600 500 400 300 200 100 0 0 100 45-degree ling 200 300 400 500 600 REAL GDP (Bilions of dollars) The economy is experiencing TE Potential GDP 700 800 TE equal to $ by billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Consider the following diagram, in which the current short-run equilibrium is at point A. At point A, the economy has If the marginal propensity to save equals 0.20, calculate the change in government spending that could eliminate the gap. S trillion. (Round your answer to two decimal places.) CO Price Level 40 120 115 111 0 LRAS 22 22.5 23 Real GDP per Year ($ trillion) SRA AD