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12 The U.S. economy slowed significantly in early 2008 and policy makers were extremely concerned abou growth. To boost the economy, Congress passed severa relief packages (the Economic Stimulus Act of 200 and the American Recovery and Reinvestment Act o 2009) that combined would deliver about $700 billic in government spending. Assume, for the sake of argr ment, that this spending was in the form of paymen made directly to consumers. The objective was to boc the economy by increasing the disposable income American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in tl United States is 0.5. Then calculate the resulting

12 The U.S. economy slowed significantly in early 2008 and policy makers were extremely concerned abou growth. To boost the economy, Congress passed severa relief packages (the Economic Stimulus Act of 200 and the American Recovery and Reinvestment Act o 2009) that combined would deliver about $700 billic in government spending. Assume, for the sake of argr ment, that this spending was in the form of paymen made directly to consumers. The objective was to boc the economy by increasing the disposable income American consumers. a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in tl United States is 0.5. Then calculate the resulting

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Certainly! Here is the transcribed text suitable for an educational website: --- **Illustrating the Effect on Real GDP** To visualize the impact on real GDP, we can use a graph that depicts the income-expenditure equilibrium. In this graph, the vertical axis is labeled "Planned aggregate spending, \(AE_{\text{Planned}}\)," and the horizontal axis is labeled "Real GDP." The graph should include: 1. **Two Planned Aggregate Expenditure Curves**: - \(AE_{\text{Planned1}}\): Represents the initial planned aggregate expenditure. - \(AE_{\text{Planned2}}\): Represents the adjusted planned aggregate expenditure after the autonomous policy change. 2. **A 45-Degree Line**: - This line is used to illustrate the points where planned spending equals real GDP, showing equilibrium. This setup helps demonstrate how changes in autonomous policy impact economic equilibrium. --- If further explanation or diagrams are needed, please provide additional resources or create corresponding visuals.
Transcribed Image Text:Certainly! Here is the transcribed text suitable for an educational website: --- **Illustrating the Effect on Real GDP** To visualize the impact on real GDP, we can use a graph that depicts the income-expenditure equilibrium. In this graph, the vertical axis is labeled "Planned aggregate spending, \(AE_{\text{Planned}}\)," and the horizontal axis is labeled "Real GDP." The graph should include: 1. **Two Planned Aggregate Expenditure Curves**: - \(AE_{\text{Planned1}}\): Represents the initial planned aggregate expenditure. - \(AE_{\text{Planned2}}\): Represents the adjusted planned aggregate expenditure after the autonomous policy change. 2. **A 45-Degree Line**: - This line is used to illustrate the points where planned spending equals real GDP, showing equilibrium. This setup helps demonstrate how changes in autonomous policy impact economic equilibrium. --- If further explanation or diagrams are needed, please provide additional resources or create corresponding visuals.
**Title: Understanding Economic Stimulus Measures in the U.S.** **Introduction:** In early 2008, the U.S. economy experienced a significant slowdown, which raised concerns among policymakers about economic growth. In response, Congress enacted several relief packages to stimulate the economy. **Key Economic Initiatives:** - **Economic Stimulus Act of 2008** - **American Recovery and Reinvestment Act of 2009** These initiatives aimed to inject approximately $700 billion in government spending into the economy. For the purpose of this explanation, it is assumed that these funds were distributed directly to consumers. The primary goal was to boost the economy by increasing the disposable income of American consumers. **Economic Analysis:** a. **Task:** - Calculate the initial change in aggregate consumer spending resulting from this policy. - Consider a marginal propensity to consume (MPC) of 0.5 in the United States. *Note: The marginal propensity to consume refers to the fraction of any change in disposable income that is spent on consumption rather than saved.*
Transcribed Image Text:**Title: Understanding Economic Stimulus Measures in the U.S.** **Introduction:** In early 2008, the U.S. economy experienced a significant slowdown, which raised concerns among policymakers about economic growth. In response, Congress enacted several relief packages to stimulate the economy. **Key Economic Initiatives:** - **Economic Stimulus Act of 2008** - **American Recovery and Reinvestment Act of 2009** These initiatives aimed to inject approximately $700 billion in government spending into the economy. For the purpose of this explanation, it is assumed that these funds were distributed directly to consumers. The primary goal was to boost the economy by increasing the disposable income of American consumers. **Economic Analysis:** a. **Task:** - Calculate the initial change in aggregate consumer spending resulting from this policy. - Consider a marginal propensity to consume (MPC) of 0.5 in the United States. *Note: The marginal propensity to consume refers to the fraction of any change in disposable income that is spent on consumption rather than saved.*
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