2. a.b.Write the formulae for calculating the expenditure multiplier and thechange in real Gross Domestic Product (RGDP).Copy and complete Table 2.1 in your answer bookletTable 2.1(2 marks)MarginalPropensity toInitial change inSpendingExpenditureMultiplierChange in RGDPConsume0.9$100,0000.8$100,0000.5$100,000(6 marks)

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Answered: 2. a. b. Write the formulae for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please show in two side by side graphs the connection between the multiplier and the AE curve (aggregate expenditure curve). Suggestion: use a different value for the multiplier in each graph and show how a decrease in AE will impact Real GDP. What determines the slope of the AE line?
YAS = 742 + 15P – 28 Poit YAD 478 – 45P+ 18G Suppose initially, the Poil = $93 per barrel and government spending is equal to $630. Part (a): Calculate equilibrium GDP and the price level. Part (b): Determine the magnitude of the multiplier if oil prices exogenously rise by $1. Part (c): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (b) is smaller (in absolute value) than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables. Part (d): Determine the magnitude of the multiplier if government spending exogenously increases by $1. Part (e): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (d) is smaller than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables.
An economy experiences an MPC of 0.75. Interest rates rise in the economy causing initial change(s) in spending of $5 billion. Simultaneously, net taxes fall by $7 billion. What is the net change to real GDP as a result of these initial impacts on the economy? A decrease of $12 billion in real GDP A decrease of $50 billion in real GDP OA decrease of $19 billion in real GDP A decrease of $61 billion in real GDP A decrease of $68 billion in real GDP
Calculate MPC, MPS and the Multiplier if consumption expenditure increases by $4,000 as a result of increase in income from $40,000 to $46,000.
In Russia, the value of multiplier is 7 Calculate the value of MPS
C AE = C+1 MPC 100 60 100 180 60 200 260 60 300 340 60 400 420 60 500 500 60 600 580 60 700 660 60 800 740 60 Find the following: 1. The aggregate expenditure AE 2. Marginal propensity to spend (MPC) 3. Marginal propensity not to spend (1-b MPS
?
In an economy, income rises by $10,000 as a result of rise in investment Expenditure by $1000. Calculate (A) Investment multiplier (b) MPC
In Utopia (a country with substantial excess resources), consumers spend 70% of their incomes and save 30%; the country spends 30% of GDP on imports and the government typically takes 10% of household incomes in taxation.a) What is the value of the multiplier?Last year, the Utopian Government spent 5Bn Utopian Dollars on current expenditure; Utopian households spent 0.5Bn Utopian Dollars in “autonomous consumption” and Utopian enterprises sold goods and services worth 10 Bn Utopian dollars to other countries. Utopian investors spent 15Bn Utopian dollars in maintaining and enhancing the country’s capital equipment.b) What was the value of GDP last year?c) What was the value of the Utopian Government’s budget surplus or deficit last year?d) How would the value of the multiplier (in 2(a) change if Utopia was a closed economy (so zero imports)?e) If the Utopian economy were already at its potential GDP (ie its full -employment GDP), what would happen to the value of the multiplier?
Explain the concept of the spending multiplier.
Use the graph to illustrate the effects of a $10 billion increase in government spending. Assume that the economy is initially producing at full employment, and the spending multiplier (m³) is 10. 165 LRAS 160 155 150 145 140 135 130 125 AD 120 115 50 100 150 200 250 300 350 400 450 500 Real GDP How much of each additional dollar of income is devoted to consumption? MPC = $ Price level (P)
TOPIC: Deriving and exploring the total expenditures curve

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