11Econ 201Extra CreditPriceLeveLRASSRAS2752652552451.ADfollowing:4 6 8 10 14 18 Real GDP (millions)Use the graph below to answer thea. How large is the output gap? What type of gap is this?b. If the MPS is 0.25, find the spending multiplier. 4If prices were completely fixed, how much spending would be necessary to return theeconomy to full employment?d. Find the short run equilibrium real GDP and equilibrium price level if we increaseaggregate demand by the amount from (c).f.Find the change in spending necessary to return the economy to full employment withincreasing prices.Find the short run equilibrium real GDP and equilibrium price level if we increaseaggregate demand by the amount from (e).

a. To determine the output gap, you need to compare the actual level of output (real GDP) with the…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 25-4 Potential 45 GDP 3 Real GDP In Figure 25-4, if the economy is in a recessionary gap, what must happen to reach potential GDP? The expenditure level must rise and'or the price level must rise. The expenditure level must fall and'or the price level must rise. The expenditure level must fall and'or the price level must fall. The expenditure level must rise and/or the price level must fall. Real Expenditures
5. In an economy, the MPC is 0.5. The graph on the right depicts the economy's aggregate demand curve. Suppose the economy starts out at Point A on the aggregate demand curve. Draw the AE curve for this case. a. b. C. d. Suppose an increase in the price level causes the economy to move to Point B on the aggregate demand curve. Draw the new AE curve. Suppose government spending decreases by $0.2T. Draw the new AD curve. In place of the change in part (c), suppose net taxes decrease by $0.2T. Draw the new AD curve. Price Level (P) 170 160 150 140 130 120 110 100 90 80 70 60 AD 2.6 3.0 3.4 3.8 4.2 4.6 2.8 3.2 3.6 4.0 4.4 4.8 Y (T of $)
1.The marginal propensity to consume in this economy is 2.The equilibrium level of output in this economy is
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
The graph below shows, the aggregate demand and supply for the economy of Etrusca. a. Draw AD2 on the graph below assuming an increase of $60 in aggregate demand. Plot only the endpoints of the curve below b. What is the new level of equilibrium GDP? c. What is the new equilibrium price level? d. How much is the reduction in GDP due to the crowding out effect?
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.
Pls help with below homework, explain the answer in 5-6 sentence only.
4. What do we mean when we talk about the export base of a region? How does an increase in the export base affect total employment? How does this relate to the multiplier? What factors limit the size of the multiplier within cities?
Question 41 The following equations describe the economy: C= 150 + 0.9Yd | = 150 G = 250 X 200 IM = 0.06Y T= 0.1Y At the equilibrium level of GDP, net exports are equal to a).-180 O b) - -20 Oc) 200 O d) 20 Next Page Previous Page Question 40 The following equations describe the economy: C = 150 + 0.9Y | = 150 G = 250 X 200 IM = 0.06Y T= 0.1Y In equilibrium GDP is equal to a) 3,000 b) 750 Oc) 3,750 O d) 7,500
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