4. Expenditures gaps The following graph shows the aggregate expenditures line (AE) for an economy where current equilibrium output is $400 billion and full-employment output is $650 billion. AGGREGATE EXPENDITURES (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 200 300 400 500 REAL GDP (Billions of dollars) The economy is experiencing a would require a $ 45-degree line billion 600 AE Full-employment GDP 700 800 0 AE ? billion. To close the GDP gap GDP gap with the absolute value of the gap equal to $ ▾ in government spending. Thus the spending multiplier for this economy is On the graph, shift the AE line to show the change in the aggregate expenditures line necessary to close the GDP gap.

4. Expenditures gaps The following graph shows the aggregate expenditures line (AE) for an economy where current equilibrium output is $400 billion and full-employment output is $650 billion. AGGREGATE EXPENDITURES (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 200 300 400 500 REAL GDP (Billions of dollars) The economy is experiencing a would require a $ 45-degree line billion 600 AE Full-employment GDP 700 800 0 AE ? billion. To close the GDP gap GDP gap with the absolute value of the gap equal to $ ▾ in government spending. Thus the spending multiplier for this economy is On the graph, shift the AE line to show the change in the aggregate expenditures line necessary to close the GDP gap.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the government allocates $1 billion for new roads. It also raises taxes by $1 billion to keep the deficit from growing. The absolute value of the government purchase multiplier is 3.33 and that of the tax multiplier is 2.33. What is the effect on equilibrium GDP? GDP does not change. ● GDP increases by $ 2.33 billion. GDP increases by $3.33 billion ⒸGDP increases by $1 billion.
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?
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.
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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
From the following data, determine the equilibrium level of real GDP.The equilibrium level of real GDP is ______________.
Aggregate expenditure (billions of 2007 dollars) 375 347 150 100 10 0 100 200 45° line AE C 300 375 Real GDP (billions of 2007 dollars) 6. Using the graph above, assume there are no taxes in this economy. Answer the following questions: a. MPC = b. MPM = C. MP to Spend = =Z= d. AE Function = e. Multiplier = f. Equilibrium level of Real GDP is
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Briefly discuss the following concepts iv. Government expenditure multiplierv. Potential output
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4. Planned expenditure and income The following table shows consumption (C), investment spending (I), and government purchases (G), in a hypothetical economy for various levels of income. Also assume that there is an income tax rate of 25%, that base consumption is $100 billion, and that the MPC is 0.333, or 1/3. This economy is closed, with no international trade, therefore net exports are equal to zero and should not be considered. Use the given information to fill in disposable income, consumption, and planned expenditures in the following table. Income: Real Disposable (After Tax) Planned GDP Income C I, G Expenditures (Billions of (Billions of dollars) (Billions of (Billions of (Billions of (Billions of dollars) dollars) dollars) dollars) dollars) 100 50 150 100 50 150 200 50 150 300 50 150 400 50 150 500 50 150
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